## Facts

- Slack went public through a NYSE direct listing that allowed immediate public trading of both newly registered shares and previously issued unregistered shares.
- Slack registered approximately 118 million shares for the listing; about 165 million unregistered shares also became eligible for sale at the same time.
- Fiyyaz Pirani purchased Slack shares on the first day of trading and later purchased additional shares after the direct listing.
- After Slack’s stock price declined, Pirani sued Slack and related individuals and entities under Securities Act §§ 11, 12(a)(2), and 15, alleging material misstatements and omissions in the registration statement and offering materials.
- Because registered and unregistered shares entered the market simultaneously, Pirani alleged he could not determine whether his shares were registered under the challenged registration statement.
- The district court denied Slack’s motion to dismiss as to statutory standing under §§ 11 and 12(a)(2) and allowed the § 15 control-person theory to proceed; Slack took an interlocutory appeal.

## Issues

1. Whether a direct-listing purchaser who cannot trace purchased shares to the challenged registration statement has statutory standing under Securities Act § 11 as a person acquiring “such security.”
2. Whether the same purchaser has statutory standing under Securities Act § 12(a)(2) as a person purchasing “such security” in a public offering conducted by means of a prospectus.
3. Whether § 15 control-person claims may proceed when the plaintiff has statutory standing under §§ 11 and/or 12(a)(2).

## Decision

- The Ninth Circuit affirmed the district court’s denial (in relevant part) of Slack’s motion to dismiss.
- The court held Pirani had statutory standing under § 11 despite inability to trace, because in a direct listing the shares sold into the public market “could not be purchased without” the issuance of the registration statement and therefore were “such security.”
- The court held Pirani also had statutory standing under § 12(a)(2) on the same “such security” rationale tied to the registration statement and offering materials enabling the public sale.
- The court held that, because Pirani had standing to pursue a § 11 claim, he could also pursue a dependent § 15 control-person claim against alleged controllers.

## Legal Principles

- In a direct listing where registered and unregistered shares are sold to the public concurrently, “such security” in §§ 11 and 12(a)(2) was construed to include shares that entered the public market through the registration statement’s effectiveness, even if the purchaser could not trace shares to the registered tranche.
- Under this approach, statutory standing under § 11 did not require pleading that the purchased shares were registered under the specific allegedly misleading registration statement when the direct listing structure made tracing impracticable.
- Statutory standing under § 12(a)(2) likewise extended to purchasers in a direct listing when the public sale depended on the same registration statement and related prospectus materials.
- A § 15 control-person claim may proceed where the plaintiff has a viable underlying claim (here, § 11 as pleaded) against the issuer.

## Conclusion

The Ninth Circuit ruled that purchasers in Slack’s direct listing could sue under Securities Act §§ 11 and 12(a)(2) without tracing their shares to the registered offering, reasoning that the registration statement enabled the public trading of the shares sold into the market; it also allowed related § 15 control-person claims to proceed on that basis.


Pirani v. Slack Technologies, Inc., 13 F.4th 940 (9th Cir. 2021)