A 2018 New York Stock Exchange rule allowing the public trading of shares without an initial public offering has given rise to a potential new accountability issue that the US Supreme Court will take up on Monday.
At issue is whether people who purchase shares in a so-called direct listing have standing to sue the issuing company for making misrepresentations in its statement registering the stock with the SEC just prior to making it publicly available.
A divided panel of the US Court of Appeals for the Ninth Circuit ruled in September 2021 that investor Fiyyaz Pirani could sue communication platform operator Slack Technologies for misrepresentations under Section 11 of the Securities Act of 1933, Bloomberg reports.
Slack’s supporters say the ruling, if affirmed, would significantly widen liability for publicly traded companies. But investors and their advocates say the Ninth Circuit was right to point out a giant loophole by which direct listed companies could avoid such accountability — effectively eviscerating protections of the Great Depression-era law. Read more.
