The US Supreme Court should resolve two questions about suits over direct listings, a Slack Technologies Inc. investor says in a case that has already made a trip to the high court.
Fiyyaz Pirani is seeking to revive at least part of his proposed class action over allegedly misleading statements in Slack‘s direct listing prospectus and registration statement. The US Court of Appeals for the Ninth Circuit tossed the case against Slack, now a subsidiary of Salesforce Inc., in February after receiving the justices’ input.
The case has highlighted the question of how federal securities laws apply to the direct listing, a relatively new vehicle for bringing companies public. The Supreme Court held in 2023 that direct listing investors must “trace” their shares to the registration statement in order to have standing to sue over alleged misstatements in that document under Section 11 of the Securities Act of 1933. But it didn’t reach the question of whether that requirement also applies to claims under Section 12(a)(2) for misleading statements in direct listing prospectuses.
The high court should decide whether that section “requires plaintiffs to plead and prove that they bought shares registered in the offering for which the defendant filed a misleading prospectus,” Pirani says in his petition.
The court should also answer whether courts should shift the evidentiary burden after the plaintiff makes a prima facie case that the shares were likely registered, compelling the publicly-listed company to prove the opposite. That makes sense in the context of direct listings, “where registered and unregistered shares are simultaneously issued to the public pursuant to a single registration statement,” Pirani says.
“Sections 11 and 12 are the pillars of the Securities Act, intended to restore investor confidence in the aftermath of the market crash that precipitated the Great Depression and essential to maintaining investor confidence in our capital markets today,” the shareholder’s July 10 petition says. “Yet the combination of the Ninth Circuit’s construction of Section 12 and its refusal to allow a reasonable burden-shifting regime risks allowing issuers to opt-out of both protections.”
Pirani alleged that Slack failed to disclose the extent to which the company would have to provide credits to customers over service disruptions.
The Supreme Court’s decision left open the possibility that Pirani could show that at least some of the 250,000 shares he allegedly bought were registered. The justices didn’t resolve whether the same traceability requirement applies under Section 12, covering prospectuses and oral communications.
Pirani conceded that tracing a particular share of stock isn’t possible, the Ninth Circuit said after the justices sent the case back. And the appeals court rejected his statistical theory that his chances of not owning a registered share were infinitesimally small.
Russell & Woofter LLC and Bragar Eagel & Squire PC represent Pirani. Counsel for Slack includes Gibson, Dunn & Crutcher LLP.
The case is Pirani v. Slack Techs., Inc., U.S., No. 25-44, petition for certiorari 7/10/25.
To contact the reporter on this story:
To contact the editor responsible for this story: