Last month the U.S. Supreme Court agreed to take up an appeal by Slack to a lawsuit over its 2019 direct listing, which alleges the company made false statements in its prospectus.
, but the decision may have ripple effects on other public listings and how unregistered shares get marketed and sold.In a departure from precedent, the court will have to decide whether to allow purchasers of unregistered stock toHistorically, U.S. courts have limited this broader liability, which includes innocent mistakes for purchasers of registered securities.
As Reuters notes: "Slack’s arguments are premised on longstanding consensus in the federal courts, dating back to the 2nd Circuit’s 1967 ruling in, that investors must be able to trace their shares back to a particular registration statement in order to bring Securities Act claims." After the price of the stock dropped, an initial plaintiff sued the company and some of its execs and board members. The individual claimed that Slack's registration statement was misleading.In a typical IPO, a company issues new shares, which have to be registered with the SEC, and those are usually the only shares solda listing until the lockup of unregistered stock held by employees and some other shareholders expires.
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