U.S. Exchange-Listed Companies: An Excerpt from Securities Class Action Filings—2021 Midyear Assessment
Overall filing activity dropped considerably in the first half of 2021, falling to 112 filings from 150 filings in the second half of 2020. This decline was largely driven by a substantial reduction in the number of M&A class actions and federal and state 1933 Act filings, although core filings with Section 10(b) allegations were also down modestly.
Filings in the first half of 2021 were generally smaller, resulting in lower MDL and DDL indices. DDL fell 50% from $162 billion in 2020 H2 to $80 billion in 2021 H1. Similarly, MDL fell 64% from $991 billion in 2020 H2 to $361 billion in 2021 H1.
Special purpose acquisition company (SPAC) IPOs have continued to explode. Filings against SPAC-related entities increased sharply in the first half of 2021. There were also 10 filings related to COVID-19, largely concentrated in the first four months of the year.
The percentage of companies subject to filings is calculated as the unique number of companies listed on the NYSE or Nasdaq subject to federal or state securities fraud class actions in a given year divided by the unique number of companies listed on the NYSE or Nasdaq in the same year.
At the current pace, 2021 is on track for only 4.2% of companies listed on major U.S. exchanges to become subject to a filing in 2021. This is the second consecutive year with a decrease in the percentage of companies subject to filings, and represents a decline from 2016–2020 levels.
Of U.S. exchange-listed companies, 1.9% (3.8% on an annualized basis) were the subject of a core filing in the first half of 2021. If this trend continues, this would be the lowest exposure since 2015
Overall, filings against U.S. exchange-listed companies are on track to be at their lowest level since 2014.
The percentage of exchange-listed companies subject to M&A filings in 2021 is on pace to decline for the fourth straight year to just 0.6%. This would be the lowest level of M&A filings since 2014.