## Facts

- Slack became publicly traded in 2019 through a direct listing on the NYSE rather than an underwritten IPO.
- Slack filed a Securities Act registration statement covering 118 million registered shares.
- At the same time, 165 million unregistered shares held by existing investors became tradeable under registration exemptions.
- Registered and unregistered shares traded together from the first day, making it difficult for market purchasers to identify whether their particular shares were registered.
- Fiyyaz Pirani bought 30,000 shares on the first trading day and later purchased an additional 220,000 shares.
- After the stock price declined, Pirani filed a putative class action alleging the registration statement and offering materials contained material misstatements and omissions concerning business performance and metrics.
- Pirani asserted claims under Securities Act §§ 11(a), 12(a)(2), and 15.

## Issues

1. Whether § 11(a) requires a plaintiff to plead and prove that the shares purchased were issued under, and traceable to, the allegedly misleading registration statement.
2. Whether the commingling of registered and unregistered shares in a direct listing alters the meaning of “any person acquiring such security” in § 11(a).
3. Whether the Supreme Court should also decide, in this case, whether § 12(a)(2) imposes a similar tracing requirement.

## Decision

- The Supreme Court unanimously vacated the Ninth Circuit’s judgment and remanded.
- The Court held that to state a § 11(a) claim, a plaintiff must plead (and later prove) that the plaintiff purchased securities registered under the particular registration statement alleged to be misleading (i.e., traceable to that statement).
- The Court rejected the Ninth Circuit’s view that “such security” extends to shares with only a minimal relationship to the registration statement in a direct listing.
- The Court did not decide whether § 12(a)(2) requires tracing and left that question for further proceedings.

## Legal Principles

- In § 11(a), “such security” refers back to the security registered under the specific registration statement alleged to contain a material misstatement or omission.
- Section 11 liability is limited to purchasers who can connect their shares to the challenged registration statement; purchasing the same class of stock in the aftermarket is not enough if traceability cannot be shown.
- Practical difficulties created by modern offering structures (including direct listings) do not justify expanding § 11(a) beyond its text; any change in scope is for Congress.
- The decision resolves § 11(a) only and does not settle the scope of § 12(a)(2).

## Conclusion

The Court reaffirmed that § 11(a) imposes a tracing requirement: a plaintiff must allege and prove that the purchased shares were issued under the registration statement claimed to be misleading, and the direct listing context does not broaden statutory standing.


Slack Techs., LLC v. Pirani, 598 U.S. 759 (2023)