CRA Insights

Initial public offerings and Section 11 claims

January 2024
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Section 11 claims often arise after a large negative stock price performance following an initial public offering (IPO). After a large negative stock price performance, shareholders and plaintiff lawyers are likely to scrutinize the registration statements to determine if the companies provided sufficient and accurate information on the company and its risks.

In this CRA Insights, we provide information on the companies that went public in the 10-year period from 2014 to 2023, and their stock price performance with special emphasis on the most recent IPOs in 2022 and 2023.

Beginning in 2016, the number of IPOs gradually increased through 2020 and spiked in 2021. The number of IPOs declined materially in 2022 and 2023 to below 2019 levels.

2021 saw a record number of both SPAC and non-SPAC IPOs. There was an unprecedented surge in the use of SPACs in 2021. SPAC IPOs increased from 240 in 2020 to 605 in 2021 and then declined to 87 in 2022 and 28 in 2023 as SPAC IPOs fell out of favor. Non-SPAC IPOs increased from 199 in 2020 to 380 in 2021, then declined to 87 in 2022, but rose again to 117 in 2023.

About 11% of the non-SPAC IPOs from 2014 to 2023 are IPOs of foreign companies issuing American Depository Receipts on the major US exchanges. The percentage of such IPOs maintained its peak 16% during each of three years from 2018 to 2020. In 2023, this percentage decreased to 12%.

There are multiple reasons for the annual variation in the number of companies that choose to go public including, for example, macroeconomic conditions and industry valuations.

Read the full CRA Insights here.