![]() Slack’s offering was a selling shareholder direct floor listing. (Traditional direct listings are also referred to as “selling shareholder direct floor listings.”) This is because direct listings involve the registration of secondary shares, meaning the public is buying shares from existing shareholders.Īs a result, the proceeds of the sales go to the sellers, not the company. The biggest issue, of course, is that a company going public through a normal direct listing takes on all the burdens, including the cost of becoming a public company, without raising capital for itself at the same time. There may have been various reasons for the comparative lack of popularity of direct listings. This compares to more than 1,000 IPOs and more than 400 de-SPAC transactions in the same five-year period. The Court held that this remains the rule even though tracing is basically impossible in the context of a typical direct listing given the numerosity of unregistered shares available for sale at the same time.Īre the Direct Listing Floodgates Now Open?Īs a reminder, from 2018 through 2022, there were only 13 direct listings. In a unanimous decision, the court held that Section 11 cases require that plaintiffs both plead (allege) and prove that they purchased shares that can be traced back to the allegedly deficient registration statement. The justices of the United States Supreme Court were not impressed. The plaintiffs’ argument contradicted what was otherwise regarded as a settled requirement under the law. The plaintiffs wanted to avoid the tracing requirement because the mix of registered and unregistered shares in the market made it all but impossible to tell if the shares they purchased were shares that were registered on the S-1 or not. The plaintiffs alleged that Slack’s S-1 registration statement was materially misleading.Īs I discussed in an earlier article on this topic, plaintiffs suing Slack under Section 11 of the Securities Act of 1933 asserted that they did not have to meet Section 11’s typical tracing requirement. When the price of Slack’s shares dropped, shareholders brought suit pursuant to Section 11 of the 1933 Securities Act. At the same time, the direct listing process allowed an additional 165 million unregistered shares to be sold in the public market. Specifically, the company registered 118 million shares for sale pursuant to its S-1 registration statement. As a result, some of the Slack common stock being traded on the New York Stock Exchange was registered pursuant to Slack’s S-1 registration statement, but certainly not all of it. ![]() Long-time readers of this blog will recall that Slack went public through a direct listing process. Slack’s Direct Listing Put Registered and Unregistered Shares Into the Public Market
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |