Supreme Court’s Recent Slack Technologies Decision

S&C Critical Insights

In this episode of S&C’s Critical Insights, Jeff Scott and Julia Malkina, Co-Leads of S&C’s Securities Litigation Practice, discuss the Supreme Court’s June 1 decision in Slack Technologies v. Pirani and the potential implications for securities litigation.

Slack Technologies went public through a direct listing, which allows existing shareholders to sell their unregistered securities on the first day of public trading at the same time as the company’s registered shares are sold. Slack claimed that the plaintiff in this case lacked standing to sue because he could not trace the purchase of his Slack shares to the registration statement.

The issue before the Court was whether Section 11 of the Securities Act of 1933 requires plaintiffs to plead and prove that they purchased securities registered under the registration statement they allege is materially false or misleading. In a win for defendants, the Supreme Court unanimously held that the plaintiffs must plead and prove these facts, reversing the U.S. Court of Appeals for the Ninth Circuit.

Jeff and Julia discuss how the ruling reaffirms the longstanding interpretation of Section 11 and note that the Court’s decision could encourage more companies to go public through a direct listing. The ruling might also encourage legislative efforts to improve tracking of the ownership and registration of securities, including through the use of blockchain technology.