On June 1, 2023, the Supreme Court of the United States unanimously upheld that plaintiffs alleging the registration statement for a “direct listing" IPO contained a material misstatement or omission, who sue under Section 11 of the Securities Act of 1933, must trace the shares they bought to the registration statement. In a direct listing, unlike a traditional IPO, unregistered shares can be sold by non-affiliates on the initial listing date, so it is possible that certain shares bought on the first day will be unregistered shares and thus not subject to the strict liability standard of Section 11.
The Court declined to resolve whether Section 12 under the Securities Act similarly requires tracing and remanded that matter to the lower courts to decide that question. In a footnote, the Supreme Court noted that the Ninth Circuit had stated that its decision to permit the plaintiff's Section 12 claim “follow[ed] from" its analysis of his Section 11 claim. The Supreme Court further noted that it is not “endors[ing] the Ninth Circuit's apparent belief that Section 11 and Section 12 necessarily travel together, but instead caution[s] that the two provisions contain distinct language that warrants careful consideration."
Gibson Dunn represents Slack in this matter, including in the case that was before the Supreme Court. A link to our full alert on this decision can be found here.