Supreme Court throws out ruling against Slack over direct listing
(Reuters) — The U.S. Supreme Court on Thursday gave Salesforce Inc.’s Slack Technologies another chance to avoid a lawsuit over the workplace communications software company's 2019 direct listing.
In a 9-0 ruling, the justices threw out a lower court's decision that had let the proposed class-action lawsuit filed by shareholder Fiyyaz Pirani to proceed under what the Supreme Court concluded was an incorrect reading of a federal investor protection law. A direct listing is an alternative to a traditional initial public offering.
The justices ordered the San Francisco-based 9th U.S. Circuit Court of Appeals to reconsider the case.
Mr. Pirani's lawsuit alleged violations of Sections 11 and 12 of the Securities Act of 1933. He claimed that the company's registration statement and prospectus for its direct listing contained misstatements about service outages, the credits it promised to pay customers when service was disrupted, and the competition it faced from Teams, Microsoft's rival software.
Slack contended the lawsuit must be dismissed because Mr. Pirani cannot prove that he bought registered shares that were specified in the company's allegedly misleading registration statement rather than shares that were exempt from registration. The registration statement was filed with the U.S. Securities and Exchange Commission.
The justices agreed with Slack.
A plaintiff must “plead and prove that he purchased shares traceable to the allegedly defective registration statement,” conservative Justice Neil Gorsuch wrote in the ruling.
Salesforce, a major business software maker, purchased Slack for $27.7 billion in 2021.
