The court vacated the Ninth Circuit’s judgment because it “followed from its analysis of 11 claim” and instructed the lower court to “reconsider in light of our holding today about the meaning of 11.” However, in doing so, the court noted that it didn’t endorse the belief that Sections 11 and 12 “necessarily travel together” and cautioned that the two provisions “contain distinct language that warrants careful consideration.” Courts likely will take a closer look at the text of Section 12 in evaluating the merits of a claim thereunder. While much of the oral argument focused on Section 12, the court’s decision mostly deferred the issue.
#Salesforce slack doj registration#
Under Slack and existing case law, plaintiffs may face difficulties tracing their shares to the allegedly defective de-SPAC registration statement because shares are issued under both the IPO and de-SPAC registration statements.Īlso at issue in Slack was plaintiff’s standing to bring a claim under Section 12 of the Securities Act, which provides liability for the sale of a security through a misleading prospectus or oral communication. The de-SPAC transaction typically registers additional shares under a second registration statement detailing the transaction, known as the de-SPAC registration statement. The SPAC then identifies a merger target and takes the target public through a de-SPAC transaction. In de-SPAC transactions, the special purpose acquisition company issues securities pursuant to a registration statement via a traditional IPO. The decision may also protect companies going public through de-SPAC transactions with a special purpose acquisition company. Even prior to Slack, companies had experimented with shorter lock-up periods. While IPOs traditionally have a lock-up period of around six months, a lock-up isn’t legally required, and IPOs without lock-up periods may fall under Slack’s protection. Alternatively, companies that choose a traditional underwritten IPO may forgo or shorten the “lock-up” period under which unregistered shares are unavailable for trading. In these situations, courts have long noted that tracing shares to the allegedly defective registration statement is “often impossible,” and aftermarket purchasers usually “will not be able to trace their shares back to a particular offering” because it requires showing “the chain of title for their shares … starting with their own purchases and ending with someone who bought directly in the offering.”Ĭompanies deciding between a direct listing and a traditional underwritten IPO may choose a direct listing to minimize Section 11 exposure. That includes successive offerings under different registration statements or even traditional IPOs after unregistered shares start trading. The court’s decision may affect not just direct listings, but also any situation where a company has multiple pools of shares publicly trading. The decision was grounded in the text of Section 11(a), which authorizes a shareholder to sue for a material misstatement or omission in a registration statement when the shareholder has acquired “such security.” The court held that “such security” refers only “to a security registered under the particular registration statement alleged to contain a falsehood or misleading omission.” While the case arose from Slack Technologies’ 2019 direct listing, the court’s holding may have broader implications for traditional initial public offerings, secondary offerings, and even de-SPAC transactions. Pirani holds that under Section 11 of the Securities Act of 1933, plaintiffs must plead and prove they purchased securities issued under the allegedly defective registration statement, versus other available securities. The US Supreme Court’s unanimous decision in Slack Technologies v.
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