It’s no secret that the number of public companies has fallen off a cliff in recent decades, but this excerpt from a recent DLA Piper Blog provides some specifics using stats from the SEC’s new Statistics & Data Visualizations page:
– The total number of reporting issuers declined from 9,656 in 2004 to 7,902 in 2024, an approximately 18.2 percent decline. This period saw a peak of 10,598 reporting issuers in 2009 followed by a steady decline to a low of 7,475 reporting issuers in 2020.
– The percentage of reporting issuers that are US-domiciled exchange-listed companies has fluctuated, ranging from 40.1 percent in 2009 to 50.5 percent in 2022.
– The number of US-domiciled exchange-listed companies has decreased from 4,461 in 2004 to 3,929 in 2024, an approximately 12.1-percent decline, with some fluctuation.
– After declining to a low of 3,542 in 2018, US-domiciled exchange-listed companies increased to 4,408 in 2022 – an approximately 24-percent increase – before declining approximately 11 percent by 2024.
– The number of foreign-domiciled exchange-listed companies steadily increased from 392 in 2004 to 937 in 2024 (reaching a high of 1,009 in 2022).
– The percentage of reporting issuers that are foreign-domiciled exchange-listed companies nearly tripled from 4.1 percent in 2004 to 11.9 percent in 2024.
– The steepest decline in the number of issuers occurred among issuers of asset-backed securities (ABS), which rose to 2,102 in 2006 and decreased to just 236 in 2011.
I think it’s interesting to note that the decline in reporting issuers hasn’t been a straight line, and even more interesting to see how much foreign issuers have increased their presence in the US markets over the past two decades. Whether that trend will continue in the “America First” era remains to be seen. Given the role that mortgage-backed securities played in the financial crisis, it’s probably not a surprise to see the magnitude of the wipeout of asset-backed issuers that took place during the Great Recession.
A few years ago, I compared the rise of retail investors that manifested itself in the first wave of the meme stock craze to the Star Trek episode, “The Trouble with Tribbles.” If you know the episode, you’ll remember that tribbles were adorable and soothing creatures, but they quickly got out of control and threatened to overwhelm the Enterprise. There’s a tendency among corporate execs to consider retail investors to be adorable and soothing as well, but they can also get out of control – especially if they decide to show their teeth.
As this WSJ article explains, that’s something that the former CEO of Opendoor Technologies recently discovered to her chagrin:
The army of retail traders who rallied around AMC Entertainment and GameStop a few years ago recently set their sights on Opendoor Technologies. They got the stock up, which is par for the course. Then they turned on Chief Executive Carrie Wheeler, which isn’t.
Wheeler’s ouster showed the renewed power of these investor mobs, who are starting to make demands on their favorite stocks much as traditional activist shareholders do—only with more online memes and name calling.
In Opendoor’s case, the manager of a tiny Canadian hedge fund emerged in July as the unlikely ringleader. Eric Jackson and his followers have since made additional demands for Opendoor’s board, and the directors appear to be listening.
The article discusses how Opendoor came to be a meme stock and how the company has tried to respond to what the WSJ calls “investor mobs” (personally, I think “tribbles” is a less judgmental term). It points out that the meme stock crowd may have moved on from Gamestop & AMC, but their influence on the market persists. In that regard, the article also says that retail accounts for nearly 20% of the stock market’s trading volume, up from 10% in 2010, and that retail investors are moving into the options market as well. God help us (and them).
There are reasons to believe that the Atkins SEC may be less inclined than its predecessor to bring enforcement actions based on “hypothetical risk factors,” but the same can’t be said for private plaintiffs. In that regard, the 2nd Circuit’s recent decision in City of Hialeah Employees’ Retirement System v. Peloton Interactive (2d. Cir; 8/25) to revive fraud claims premised on hypothetical risk factor disclosure is likely to bolster their appeal to members of the plaintiffs’ bar.
In that case, the 2nd Circuit overruled the SDNY’s prior decision and reinstated Rule 10b-5 claims against Peloton arising out of, among other things, hypothetical risk factor disclosure concerning excess inventory levels. Here’s an excerpt from the Court’s opinion:
In its SEC filings of May 7, August 26, and November 4, 2021, Peloton warned: “If we fail to accurately forecast consumer demand, we may experience excess inventory levels or a shortage of products available for sale. Inventory levels in excess of consumer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margins to suffer.”
We agree with the district court that the risk disclosure in the Form 10-Q of May 2021 was not actionable. But the risk disclosures in the Form 10-K and the Form 10-Q of August and November 2021 were plausibly false or misleading. The SAC plausibly alleged that by August 26, 2021, the specific financial consequences described in these disclosures were not merely hypothetical “but had already materialized and resulted in significant disruption to [Peloton’s] business.” Teladoc, 2024 WL 4274362, at *5.
The SAC alleged that following the earnings call on August 26, 2021, Peloton reduced the price of the original Bike by $400. See App’x 237 (¶ 187). According to CW1, this reduced price was a direct response to Peloton’s “excess inventory.” Id. at 184 (¶ 31). Moreover, on November 4, 2021, Peloton disclosed that 91 percent of its inventory was unsold and reduced its earnings guidance by approximately $1 billion. See id. at 178 (¶ 7); id. at 252-53 (¶¶ 219-23). In other words, Peloton was already engaging in “the sale of excess inventory at discounted prices.” Id. at 424.
The Court concluded that, accepting the plaintiffs’ allegations as true, the presentation of these inventory-related risks as hypothetical in Peloton’s August and November 2021 SEC filings was potentially misleading.
Dual class capital structures remain common in IPOs, but in response to investor pressure, many companies have opted to include a time-based sunset provision in their charter documents that will eventually eliminate the high-vote class of stock. When the ride sharing company Lyft went public in 2019, it took some heat from the CII for turbo-charging its high vote stock (20 votes per share v. the typical 10) and for failing to include sunset provisions in its charter. Last month, Lyft and its founders decided to unwind that structure.
That move came in connection with the departure of the company’s two founding shareholders from the board and was effectuated by their decision to convert their high-vote Class B common stock into low-vote Class A common stock. Here’s an excerpt from Lyft’s press release:
Lyft, Inc. (Nasdaq: LYFT) today announced that its co-founders, Logan Green, Chair of the Board, and John Zimmer, Vice Chair of the Board, intend to step down from the Lyft Board of Directors (the “Board”) on August 14, 2025, marking the successful completion of a two-year transition plan. Green and Zimmer will also convert all shares of Lyft Class B common stock to Lyft Class A common stock on August 15, 2025. Following the conversion, all holders of Lyft common stock will hold Class A common stock with equal voting rights, and Green and Zimmer will collectively own approximately 9.69 million shares of Lyft Class A common stock.
According to a recent ValueEdge Advisors blog, Green and Zimmer’s decision to convert their Class B shares reduced their voting power in the company from 30% to under 2%. The Class A common stock’s price popped by over 8% on the day after the announcement and has tacked on another 2.5% since then.
Last month, a Texas federal court refused to dismiss the state’s antitrust claims against BlackRock, Vanguard and State Street associated with their engagement with portfolio companies on ESG-related matters. This Cleary memo says that the Court’s decision is going to add another layer of complexity to engagements between companies and shareholders. This excerpt lays out why companies and shareholders are likely to proceed even more cautiously as a result of the decision:
Companies may be taking on greater risk when they take an action advocated by one or more shareholders (or other climate change advocates) that are also lobbying for actions at competing firms. Companies should avoid engaging with their competitors and overlapping shareholders in a group setting, or taking action because shareholders promise that they will also pressure competing firms to act similarly. The Texas case provides new contours to risk of a finding of collective action through industry or other groups, by including shareholders as a nexus to potential coordination.
Similarly, we expect shareholders may also refresh their engagement effort strategies in light of this case and take a more conservative, thoughtful and tailored approach to outreach with each company to avoid any optics of coordination among themselves or among their portfolio companies.
The blog contends that the potential for conspiracy liability raised by this decision together with the SEC’s guidance narrowing the path for major investors to file short form Schedule 13G beneficial ownership disclosures may have a cooling effect on the frequency of shareholder engagements and reduce the pressure placed on companies to make changes in line with investor policies.
As we previously blogged, the DOJ and FTC submitted a Statement of Interest in the Texas lawsuit. While the antitrust agencies weren’t supportive of the defendants on most of the issues raised by the lawsuit, they did clarify that engagements on governance topics wouldn’t typically jeopardize shareholders’ status as passive investors for purposes of the antitrust laws.
We’ve previously blogged about some of the new legal and compliance risks that companies face as a result of the Trump administration’s tariff regime. That blog highlighted a DOJ memo stating that its policies on white collar crime identified “trade and customs fraudsters, including those who commit tariff evasion” as a key threat to national security. This Blank Rome memo says that the DOJ is putting its money where its mouth is when it comes to tariff enforcement. Here’s the intro:
The U.S. Department of Justice (“DOJ”) has announced a significant realignment of resources that will fundamentally reshape criminal enforcement of international trade rules. By combining senior prosecutors from its Market Integrity and Major Frauds Unit (“MIMF”) with attorneys reassigned from the soon-to-be-defunct Consumer Protection Branch, DOJ is forging a newly branded “Market-, Government-, and Consumer-Fraud Unit” with a sharpened mandate: focus on customs fraud and tariff evasion.
This initiative—unveiled in speeches, internal memoranda, and follow-on press coverage—signals that trade and customs violations, once largely the province of civil enforcement by U.S. Customs and Border Protection (“CBP”) or DOJ’s Civil Fraud Section, will now also sit squarely on the DOJ’s criminal docket.
The memo says that the DOJ’s action can be expected to result in, among other things, acceleration of investigations, criminalization of historically civil misconduct, heightened prosecutorial interest due to the national security framing of cases, and broader asset seizure and forfeiture efforts.
Shortly after the Trump administration announced its tariff program, warning flags were raised about the possibility of the False Claims Act being used against companies alleged to have engaged in efforts to evade applicable tariffs. Those warnings proved to be prescient, as the intro to this Sullivan & Cromwell memo explains:
On July 15, 2025, the United States Attorney’s Office for the District of South Carolina filed a qui tam intervenor complaint under the False Claims Act in United States ex rel. Joyce v. Global Office Furniture, LLC, et al., alleging that a South Carolina office furniture company, Global Office Furniture, submitted false invoices to Customs and Border Protection (“CBP”), evading at least $2 million in tariffs on imported goods.
The company allegedly engaged in a so-called “double-invoicing scheme,” whereby an importer creates two separate invoices—one reflecting the accurate price that is used to collect payment from the purchaser, and one with a falsely reduced price that is submitted to CBP and used to calculate customs duties. The company’s former office manager filed a qui tam whistleblower complaint under seal on March 30, 2020, leading to both a civil and criminal investigation later that year.
Although the conduct alleged in the complaint predates “Liberation Day” by several years, S&C’s memo says that the complaint confirms that the Trump administration’s focus on tariff and trade issues is reflected in DOJ civil and criminal enforcement priorities, and that companies with international supply chains need to review and consider updating their compliance programs to ensure that customs and tariff-related issues are appropriately addressed.
Last week, Attorney General Pam Bondi issued a memorandum to all federal agencies clarifying the application of federal antidiscrimination laws to DEI programs. The memo highlights five categories of conduct that could give rise to liability for violating federal anti-discrimination laws. This excerpt from a Latham memo on the guidance summarizes the categories of conduct that the DOJ finds to be problematic:
1. Preferential treatment based on protected characteristics, which includes race-based scholarships or programs, preferential hiring or promotion practices, and access to facilities or resources based on race or ethnicity.
2. Prohibited use of proxies for protected characteristics, which could occur when a federally funded entity “intentionally uses ostensibly neutral criteria that function as substitutes for explicit consideration of race, sex, or other protected characteristics.” The Guidance notes that potentially unlawful proxies include requiring narratives related to “overcoming obstacles” or “diversity statements” insofar as they “advantage[] those who discuss experiences intrinsically tied to protected characteristics[.]” Critically, the Guidance suggests that efforts to recruit from particular organizations or geographic areas can constitute unlawful activity if these entities or locations were chosen “because of their racial or ethnic composition rather than other legitimate factors.”
3. Segregation based on protected characteristics, which includes race-based training sessions, segregation in facilities or resources, and implicit segregation through program eligibility. Importantly, DOJ reiterates the administration’s position that “failing to maintain sex-separated athletic competitions and intimate spaces can also violate federal law” when transgender individuals are permitted “to access single-sex spaces designed for females[.]”
4. Unlawful use of protected characteristics in candidate selection, which includes race-based “diverse slates” in hiring, sex-based selection for contracts, and race- or sex-based program participation goals (e.g., requirements that programs have a certain percentage of participants from underrepresented groups).
5. Training programs that promote discrimination based on protected characteristics or promote hostile environments, which include trainings that affirm that “all white people are inherently privileged” or recognize the concept of “toxic masculinity.” The Guidance notes that such trainings “may” violate Title VI or Title VII “if they create a hostile environment or impose penalties for dissent in ways that result in discriminatory treatment.”
The final section of the AG’s memorandum is devoted to a discussion of recommended best practices for entities to employ in order to ensure their programs comply with federal law.
Shareholder engagement has become a more fraught topic following Corp Fin’s issuance earlier this year of updated CDIs suggesting that engagement on certain governance topics could jeopardize a major investor’s ability to report its holdings on the short-form Schedule 13G. Since that’s the case, it will undoubtedly come as welcome news to investors that a recent FTC/DOJ Statement of Interest indicates that corporate governance engagements generally won’t give rise to concerns under the federal antitrust laws. This excerpt from Fried Frank’s memo on the statement explains:
The recent FTC/DOJ Statement of Interest in connection with the State of Texas’ antitrust lawsuit against institutional investors BlackRock, State Street and Vanguard provides valuable insights into the agencies’ interpretation of the antitrust “solely for investment” exemption. Notably, the agencies make clear that investors’ engagement with issuers to influence corporate governance structures and processes is consistent with passive investment under the antitrust laws.
While there has always been an understanding in the investor community that engagement with issuers on certain corporate governance matters would not preclude an investor from relying on the Hart-Scott-Rodino (“HSR”) Act’s “solely for investment” exemption, this is the first time that the antitrust agencies have explicitly confirmed that position to the market. The FTC and DOJ statements provide important clarity on how investors can engage with issuers without losing the ability to rely on the HSR exemption for passive investments.
The memo notes that, with this statement, the antitrust agencies have for the first time issued clear guidance that engagement with and attempts to influence issuers concerning certain corporate governance matters, including board size, compensation policies, and public reporting practices, are consistent with consistent with passive investment.
The most notable change implemented by the SEC’s 2020 amendments simplifying private offering exemptions was the replacement of the SEC’s patchwork approach to determining when one offering will be integrated with another with a single, comprehensive rule addressing integration issues across a full range of possible settings. As Dave observed last year, that was a big relief for most issuers. However, a recent letter from Stan Keller and Richard Leisner to SEC Chairman Paul Atkins and Acting Corp Fin Director Cicely LaMothe raises a remaining area of concern under the new regime that they’d like to see addressed. This excerpt from their letter explains the problem:
Rule 152(a), as now in effect, provides a general principle for determining when, in the absence of a safe harbor under Rule 152(b), two or more offerings need not be integrated and treated as part of the same offering for purposes of qualifying for an exemption from registration. Clause (1) of Rule 152(a) requires that each purchaser in an exempt offering in which general solicitation is not allowed, in the absence of a substantive relationship with that purchaser established before the offering commenced, has not been solicited through the use of general solicitation.
There is no stated time limit on when that general solicitation may have taken place and therefore no cleansing period. Accordingly, if a purchaser was generally solicited some time ago (possibly a year or more before and likely in connection with a different offering), under the language of the rule they remain ineligible to participate in the current offering because that earlier general solicitation will be attributed to the current offering, thus making the exemption unavailable for the entire offering. This requirement also results in negating the availability of the safe harbor under Rule 152(b)(1) premised on a 30-day cooling off period.
The authors suggest that Rule 152(a)(l), like the safe harbor in Rule 152(b)(l), should provide for a cooling off period of an appropriate length in order to have objective certainty as to when a purchaser previously solicited is out of the penalty box.
Richie Leisner observed in an email message to me that this open-ended “penalty box” isn’t a big issue for lawyers with clients that use financial intermediaries in their transactions. However, he noted that “out here in the hinterlands, our clients in most cases are not attractive enough or wealthy enough to involve licensed financial intermediaries. In these circumstances Rule 152 continued to pose a trap for the unwary.”
The letter also asks the SEC to address similar concerns surrounding the provisions of Rule 144(i) that make Rule 144 unavailable for securities of shell companies and impose current information requirements as a condition to use of the rule by holders of securities of former shell companies without any time limitation.
