After the news emerged last week that Chinese cybersecurity regulators had cracked down on the ride-sharing firm DiDi Global shortly after the company completed its U.S. IPO, the company was hit with a U.S. securities class action lawsuit. However, DiDi was not the only Chinese company that recently completed a U.S. IPO that was targeted by the Chinese regulator. Two other Chinese companies that completed U.S. IPOs in June – Full Truck Alliance Co. Ltd. and Kanshun Limited – were both also notified that their companies were under review by the cybersecurity regulator. And now both of these companies have also been hit with U.S. securities class action lawsuits, as discussed below.
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Used Vehicle Re-Seller Hit with SPAC-Related Securities Suit
One of the most distinct securities litigation phenomena so far this year has been the increase in securities litigation involving post-SPAC-merger operating companies. In the latest example of this type of litigation, a plaintiff shareholder has filed a securities class action lawsuit against used vehicle consignment re-seller CarLotz, which became a public company through a January 2021 merger with a Special Purpose Acquisition Company (SPAC). As discussed below, CarLotz’s first financial reports as a public company disappointed investors and litigation has now ensued. A copy of the July 8, 2021 complaint against the company can be found here.
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Chinese Ride-Hailing Firm DiDi Hit With Securities Suit Related to Its Recent IPO
On July 6, 2021, after the Wall Street Journal reported that prior to DiDi’s June 30, 2021 U.S. IPO, government authorities had urged the Chinese ride-hailing firm to postpone the offering, but that the company, under pressure from investors, had gone ahead with the IPO anyway, it seemed that it would only be a matter of time before DiDi would be hit with a U.S. securities lawsuit. Indeed, as it turned out, the same day the Journal article appeared, an investor filed a U.S. securities class action lawsuit against the company. As discussed below, the lawsuit is based on cybersecurity and privacy concerns relating to the company’s ride-hailing app. A copy of the investor’s July 6, 2021 complaint can be found here.
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DraftKings Hit with SPAC-Related Securities Suit
In the latest example of a post-SPAC-merger company getting hit with a securities class action lawsuit, the online sports gaming and betting company DraftKings has been sued in a securities suit involving alleged pre- and post-SPAC-merger activity of one of the merged companies. As discussed below, the new lawsuit is the latest SPAC-related securities suit based supposed revelations in a short-seller’s report. A copy of the plaintiff’s complaint can be found here.
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Federal Court Securities Lawsuit Filings Decline in Year’s First Half
Federal court securities class action lawsuit filings declined in the first half of 2021 to the lowest semiannual levels in several years. Several factors contributed to this relative decline, most significantly the shift by plaintiffs’ lawyers toward filing federal court merger objection lawsuits as individual actions rather than as class actions. In addition, as discussed further below, other factors contributed to the relative decline. The filing levels in the year’s first six months puts the filing for the full year 2021 on pace for the lowest annual filing levels since 2015, after several intervening years in which filings were at historically high levels.
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Guest Post: Ninth Circuit Invokes Lorenzo to Revive Scheme Liability Claims
As I discussed in a recent post (here), the Ninth Circuit recently reversed in part the district court’s dismissal of the Google+ user data-related securities class action lawsuit. One feature of the decision that perhaps did not attract as much attention is the appellate court’s reversal of district court’s dismissal of the plaintiff’s scheme liability claims. In the following guest post, Bruce Vanyo and Jonathan Rotenberg discuss the significance of the scheme liability portion of the Ninth Circuit’s opinion. Bruce and Jonathan are partners in the Securities Litigation practice at Katten Muchin Rosenman LLP, resident in the New York office. I would like to thank Bruce and Jonathan for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
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Guest Post: IPO Litigation Risk
Securities class action litigation activity involving IPO companies recently has been a significant concern, for the companies themselves as well as for their insurers. In the following guest post, Stanford Law School Professor Michael Klausner and Jason Hegland, Stone Kalisa, and Sam Curry of Stanford Securities Litigation Analytics take a look at the data surrounding IPO-related securities litigation. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
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Guest Post: Analyzing Securities Class Actions by Size
One of the key considerations related securities class action litigation risk is company size as measured by market capitalization. In the following guest post, John Cheffers details this relation between company size and securities class action litigation risk. John is Associate Counsel and Director of Research for Watchdog Research. I would like to thank John for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is John’s article.
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Will SPAC Warrant Accounting Restatements Result in Further Securities Class Action Litigation?
On April 12, 2021, when John Coates, the acting director of the SEC Division of Corporate Finance, and Paul Munter, the SEC’s acting chief accountant, issued a statement noting their concerns about the way that SPACs were accounting for warrants issued in connection with SPAC IPOs, they also noted that some entities may need to reclassify the warrants from equity to liabilities, and that the change in accounting treatment might require some entities to restate prior financial statements. As it has turned out, many SPACs have in fact reclassified their warrants and many have in fact restated their financials, as discussed below. In at least one case, discussed in earlier post on this site (here), a SPAC-acquired company that restated its financial based on the warrant accounting issue has been hit with a securities class action lawsuit – which raises the question whether other restatements by other SPACs and de-SPACs will trigger further securities class action litigation.
That is the question asked in a June 22, 2021 Law360 article by Elaine Harwood, Steven McBridge and Laura Simmons of Cornerstone Research entitled “Will SPAC Restatement Wave Trigger Shareholder Litigation?” (here). As discussed below, the authors’ article addresses several interesting and important questions about the warrant accounting issue and the possibility for further litigation.
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Biopharma Company Hit with COVID-19-Related Securities Suit
We are now well into the second year of the COVID-19 pandemic, yet at this late date the COVID-19-related securities class action lawsuits continue to come in. In the latest example, Ocugen, a U.S.-based gene therapy development company that hoped to develop a COVID-19 vaccine, was hit with a securities class action law after a setback in its regulatory approval efforts. A copy of the plaintiff’s June 17, 2021 complaint against Ocugen can be found here.
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