5/28/2023 0 Comments Slack technologies inc class a![]() If the court finds a misrepresentation or material omission, defendants can escape liability only by proving the affirmative defenses of negative causation or, in the case of individuals, due diligence- inquiries rarely resolved at the pleading stage. Section 11 also flips the burden of proving loss causation, imposing on defendants the burden of showing non-culpable reasons for the decline below the stock's offering price. Unlike fraud claims under the securities laws which require proof of reckless or intentional misconduct, Section 11 imposes strict liability against the issuer for innocent or merely negligent misstatements in a registration statement. The result, if it remains undisturbed, raises some troubling questions for defendants. Court of Appeals for the Ninth Circuit, in a 2-1 decision, affirmed a district court decision finding that shareholders had standing under the Securities Act to challenge statements made in Slack's direct listing registration statement. These trends converged with the litigation filed against Slack Technologies, challenging its direct listing under the Securities Act. 1 At the same time, the development of direct listings has given companies seeking to list their shares on exchanges an alternative to the traditional initial public offering. In the past several years, the number of claims filed against newly public companies under the Securities Act of 1933 has increased significantly.
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