Standing to Sue Slack Technologies Inc.: A Recent Development in Securities Law

Slack Technologies Inc., a popular platform for team communication and collaboration, has been embroiled in a legal battle over alleged inaccuracies and misrepresentations made in its registration statement ahead of a direct listing. In a recent ruling, the Ninth Circuit Court of Appeals affirmed the district court's decision that the plaintiff had standing to sue Slack and individual defendants under Sections 11 and 12(a)(2) of the Securities Act of 1933.

The panel explained that because standing existed for the plaintiff's Section 11 claim against Slack, it also existed for a dependent Section 15 claim against controlling persons. This ruling is significant as it clarifies the scope of standing in securities litigation cases involving direct listings.

According to the plaintiff, Slack's registration statement was inaccurate and misleading because it failed to disclose important information about the company's service agreements. These agreements obligated Slack to pay for service disruptions, which were frequent due to the company's guarantee of 99.99% uptime. Furthermore, the statement downplayed the competition Slack faced from Microsoft Teams at the time of its direct listing.

The Ninth Circuit held that the plaintiff had standing to sue because his shares could not be purchased without the issuance of Slack's registration statement, thereby demarking these shares as 'such security' under Sections 11 and 12 of the Act. In other words, the plaintiff's ownership interest in Slack was directly impacted by the alleged misrepresentations made in the company's registration statement.

This ruling is important for investors and companies alike, as it highlights the importance of transparency and disclosure in securities offerings. Companies must ensure that their registration statements accurately reflect the risks and challenges associated with their business operations to avoid potential liability claims.

In conclusion, the recent decision by the Ninth Circuit Court of Appeals has significant implications for standing in securities litigation cases involving direct listings. The ruling emphasizes the need for companies like Slack Technologies Inc. to provide accurate and comprehensive information to investors to ensure a fair and transparent market.

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