Macroeconomic Factors

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The accelerated pace of large corporate bankruptcy filings continued in the last 12 months, as high interest rates, inflation, and other factors continued to take their toll. According to a new report from Cornerstone Research, the number of filings during the second half of 2023 and the first half of 2024 were more than 40% above the long-term annual averages. The report, which is entitled “Trends in Large Corporate Bankruptcies – Midyear 2024 Update,” can be found here. Cornerstone Research’s October 2, 2024, press release about the report can be found here.Continue Reading Cornerstone Research: Large Corporate Bankruptcy Filings Continue to Increase

As I have noted in numerous posts on this site (most recently here), SPAC-related litigation has been a significant factor in the overall volume of corporate and securities litigation filings in recent years. But while I have been attentive to noting the lawsuits as they have been filed, it could be argued that I have not been as dutiful in noting how these cases are being resolved. One recent case resolution – the settlement of the various SPAC-related litigation involving ATI Physical Therapy – is particularly interesting. The court recently approved the settlement of these cases for a total of $31 million. As discussed below, there are several interesting features of these settlements. The court’s approval of the settlements is detailed in a September 24, 2024, Law360 article (here).Continue Reading ATI Physical Therapy Settles SPAC-Related Litigation for $31 Million

The pandemic officially ended well over a year ago, but the pandemic’s effects continue to ripple through the economy and affect company’s operations and financial results. Moreover, these effects continue to translate into securities class action litigation. The latest example is the lawsuit filed earlier this week against the Canadian defense software company CAE, Inc., which was sued after the disruptive effects of the pandemic caused certain of its fixed-price long-term contracts to be more costly and less profitable, notwithstanding the company’s assurances that it was managing the “ongoing challenges posed by the pandemic.” A copy of the July 16, 2024, complaint in the lawsuit can be found here.Continue Reading Defense Firm Hit with COVID and Supply Chain Disruption-Related Securities Suit

In my recent round-up of the Top D&O stories of 2023, I noted that one of the key drivers contributing to the number of securities class action lawsuit filings last year was the presence of macroeconomic factors affecting company operations and financial results. Among these factors was supply chain disruption. While the pandemic-related disruptions that snarled supply chains in 2021 and 2022 appeared to have eased during 2023, the impact from the earlier supply chain disruptions continues to weigh on some businesses.

 In the latest example of how the prior supply chain disruption continues to affect businesses and how that can translate into securities litigation, on January 16, 2024, a plaintiff shareholder filed a securities lawsuit against advanced driver assistance system company Mobileye Global, after the company announced that it anticipated lower than expected sales of its key product because its leading customers had built up product in 2023 in order to avoid supply disruptions of the type that resulted from supply chain constraints in 2021 and 2022. This latest lawsuit shows how the consequences from pandemic related supply chain disruptions are continuing to weigh on businesses and result in securities litigation. A copy of the January 16, 2024 complaint can be found here.Continue Reading Supply Chain Woes Causing Inventory Build-Up Leads to Securities Suit

The directors’ and officers’ liability environment is always changing, but 2023 was a particularly eventful year, with important consequences for the D&O insurance marketplace. The past year’s many developments also have significant implications for what may lie ahead in 2024 – and possibly for years to come.  I have set out below the Top Ten D&O Stories of 2023, with a focus on future implications. Please note that on Thursday, January 11, 2024 at 11:00 AM EST, my colleagues Marissa Streckfus, Chris Bertola, and I will be conducting a free, hour-long webinar in which we will discuss The Top Ten D&O Stories of 2023. Registration for the webinar can be found here. I hope you can join us for the webinar.Continue Reading The Top Ten Stories in D&O of 2023

D&O insurers closely track the annual number of securities class action lawsuit filings. The number of annual filings can provide some indication of the insurers’ ultimate loss costs for the year. The current year’s filing patterns can also inform the insurers’ efforts to try to determine the profit-making price for their insurance product.

In 2023, the number of federal court securities class action lawsuits filed increased more than 7% compared to 2022, although the number of federal suit filings still remained well below the elevated levels seen in the recent past. Several factors contributed to the increased number of securities suit filings during the year, including disruption in the banking sector as well as the overall impact of macroeconomic factors.Continue Reading Federal Court Securities Class Action Lawsuit Filings Increased in 2023

Throughout 2023, I have noted examples of securities class action lawsuit filings involving companies whose operations or financial results were undercut by adverse macroeconomic conditions. The specific adverse economic conditions involved have included, for example, rising interest rates, heightened economic inflation, and supply chain and labor supply disruptions.

In yet another example of this phenomenon, a plaintiff shareholder has this week sued the software company Expensify in a lawsuit alleging not that a single adverse macroeconomic factor undercut the company’s results, but rather that adverse macroeconomic conditions in general hurt the company’s financial results and caused it to fall short of the growth projections it made in its IPO. As discussed below, the overall macroeconomic conditions that hurt this company and that were such a factor in securities class action litigation frequency overall in 2023 likely will continue as we head into 2024. There also is a D&O practitioner’s pointer below for those willing to read all the way to the end of this post. A copy of the November 2, 2023, complaint filed against the company can be found here.Continue Reading Securities Suit Alleges “Macroeconomic Headwinds” Undercut IPO Company

Throughout the year, macroeconomic considerations have been an important factor in the number of securities class action lawsuit filings, including economic inflation, and supply chain and labor supply disruption. Another important factor has been rising interest rates, which, among other things contributed to several high-profile bank failures earlier this year, and which in turn led to the filing of follow-on securities suits.

In the latest example of macroeconomic factors affecting businesses and translating into a securities class action lawsuit filing, a plaintiff shareholder has filed a securities class action lawsuit against the standby power generator company, Generac Holdings, after the company announced that declining consumer spending due to rising interest rates caused the company second quarter 2023 revenues to fall below expectations. A copy of the November 21, 2023, complaint can be found here.Continue Reading High Interest Rates Undercut Consumer Demand, Leads to Securities Suit Filing

Earlier this year, three of the largest banks failed in a sequence of events that was dubbed the Banking Crisis of 2023. With the passage of time, fears that the three failures could foreshadow further failures and deeper woes seemingly subsided, though a wave of banking institution downgrades in August 2023 briefly rekindled concerns. More recently, things have been quiet. Does that mean it is time to sound the all-clear signal? Perhaps, but there are signs out there suggesting continued vigilance may be in order.Continue Reading Checking in on the 2023 Banking Crisis

A host of macroeconomic factors continue to weigh on the U.S. economy, including rising interest rates, economic inflation, and supply chain and labor supply disruption. Geopolitical factors such as the War in Ukraine and now the Gaza war in Israel further complicate the picture. These various factors have serious ramifications for the operations of many businesses and for their financial performance. In some cases, the impact of these factors on companies can also translate into securities litigation. In the latest example of this phenomenon, the auto parts company Advance Auto Parts has been hit with a securities class action following a decline the price of the company’s share price after the company announced that its “strategic pricing initiative” was not sufficient to avert the impact of inflation and other macroeconomic factors on the company’s financial performance. A copy of the October 9, 2023, complaint filed against the company can be found here.Continue Reading Inflation Weighs on Company Performance, Leads to Securities Suit