December 14, 2022

Direct Listings: SCOTUS Grants Cert in Slack Technologies Case

Yesterday, the SCOTUS granted Slack Technologies’ cert petition in a case raising the issue of whether Section 11 and Section 12(a)(2) of the 1933 Act require a plaintiff to be able to trace their shares to those sold in the registered offering at issue.  Slack asserted this tracing requirement – which has been recognized by several circuit courts – as a defense to Section 11 claims arising out if its 2019 direct listing.

That defense was rejected by a California federal court and by the 9th Circuit, but now Slack will get another bite of the apple in the Supreme Court. The stakes are very high here – if the tracing requirement survives, then the high-profile companies for which a direct listing is a viable alternative will have significant advantages over those that take the traditional IPO route. If it doesn’t survive, then we may see a lot more Section 11 litigation involving follow-on offerings by public companies.

John Jenkins