<i>Slack</i> SCOTUS Decision

The Supreme Court has just given companies looking to go public another reason to do it through direct listings.

The federal securities laws impose strict liability for misleading statements made in connection with initial public offering documents. As a result, if a newly public company's stock price falls below its IPO price, for whatever reason, the company is likely to face a securities class action. In recent years, direct listings have become more popular, in part as a way to avoid litigation and potential liability under Section 11 of the Securities Act of 1933. That is because, under long-standing precedent, only shareholders who purchased securities registered under the challenged registration statement had standing to sue. In a direct listing, registered and unregistered shares are issued simultaneously, making it difficult, if not impossible, for investors to show that the securities they purchased were registered.