NERA Economic Consulting and Cornerstone Research have released their respective 2022 annual reports on federal securities class action filings. As usual, the different methodologies employed by the two organizations have led to slightly different numbers, although they both identify the same general trends. (Note: one key difference is that Cornerstone includes securities class actions alleging claims under the Securities Act of 1933 that are filed in state court, which appears to have added 11 filings to its 2022 total).
The findings for 2022 include:
(1) The reports agree that there was a slight decline in overall filings, with the scarcity of M&A-related filings over the past two years being the prime driver of the historically low numbers. NERA finds that there were 205 filings (compared with 210 filings in 2021), while Cornerstone finds that there were 208 filings (compared with 218 filings in 2021). Note that the number of non-M&A filings tracks the historical average of about 200 cases a year.
(2) Filings related to special purpose acquisition companies (SPACs) continued to be significant, constituting more than 10% of all filings. NERA identified 25 SPAC-related cases (up from 24 in 2021), while Cornerstone identified 24 SPAC-related cases (down from 33 in 2021). That said, the pace of SPAC-related filings appears to be decreasing, with Cornerstone concluding that there were only 6 filings in the second half of the year.
(3) Both NERA and Cornerstone analyzed the number of filings with cryptocurrency-related claims, which include unregistered securities filings. NERA identified 25 filings with cryptocurrency-related claims (as compared to 10 in 2021), while Cornerstone identified 23 filings with cryptocurrency-related claims (as compared to 11 in 2021). Given the level of SEC enforcement activity in this area, Cornerstone expects filings in this area to continue at elevated levels in 2023.
(4) Cornerstone finds that the number of federal filings with Section 11 claims and state filings alleging claims under the Securities Act of 1933 surged due to heightened IPO activity in 2021 and subsequent stock price declines the following year.
(5) NERA finds that if settlements related to merger objections, settlements with no cash payment to the class, settlements related to crypto unregistered securities cases, and individual cases with settlements of $1 billion or greater are removed, the annual average settlement value in 2022 was $38 million (a significant increase over the 10-year low of $21 million in 2021).
The NERA report can be found here. The Cornerstone report can be found here.