The number of securities class-action lawsuits filed in the first half of 2021 has fallen considerably from the levels in the second half of 2020, according to a report released Wednesday by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse.
Plaintiffs filed 112 securities class-action cases in federal and state courts in the first half of 2021, down 25% from the 150 cases filed in the second half of 2020, according to the report, "Securities Class Action Filings — 2021 Midyear Assessment." This marks the lowest number of filings since the first half of 2015.
The report attributed the decline in filing activity to a 66% drop in filings related to mergers and acquisitions compared with the second half of 2020. Of the cases filed in the first half of the year, only 12 were M&A filings. The number of federal and state court filings alleging claims under the Securities Act of 1933 also continued to decline.
There were 10 complaints filed in 2020 related to the COVID-19 pandemic, with six of them occurring in January and February. Half of these complaints filed were related to treatments or vaccines failing to make it to market.
Despite the decline in overall cases filed, there were 14 federal class actions related to special purpose acquisition companies in the first half of 2021, more than twice the number filed in all of 2020.
"The better the market for investors, the worse the market for class-action securities lawyers," said Joseph A. Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse and a former commissioner of the Securities and Exchange Commission, in a news release. "Plaintiff lawyers typically rely on sharp price declines for their best cases, and if the market isn't generating those declines, plaintiffs' ability to file big-ticket securities fraud actions is limited."
The report's Maximum Dollar Loss index showed a sharp drop in the first half of 2021: $361 billion, down 64% from the $991 billion during the second half of 2020.
