The U.S. Supreme Court held that purchasers of shares sold to the public through a direct listing cannot sue under Section 11 of the Securities Act of 1933 unless they can trace their shares to an allegedly defective registration statement. The short, unanimous decision in Slack Technologies, Inc. v. Pirani (June 1, 2023) appears likely to increase the difficulty of pleading § 11 claims arising from direct listings, thereby requiring dissatisfied purchasers to resort to the Securities Exchange Act of 1934, which imposes stricter standards for liability. The Court declined to comment on Securities Act § 12(a)(2)’s requirements, leaving the issue for the Ninth Circuit on remand.
IPO
Delaware Chancery Court Denies Dismissal of Challenge to SPAC Merger Disclosures
By Jonathan Richman on
The Delaware Court of Chancery yesterday denied a motion to dismiss a class action alleging that the directors and sponsor of a special-purpose acquisition company (a “SPAC”) breached their fiduciary duties by disloyally depriving the SPAC’s public stockholders of information material to their decision whether to redeem their stock before…
Post-SPAC Nikola Settles SEC Inquiry, Agrees to Pay $125 Million
By Corey I. Rogoff on
Nikola Corporation stormed onto the electric vehicle scene in 2016 offering concepts for zero-emission vehicles. While the SEC does not set emission standards, they have long had standards for omissions – and Nikola is being left with a nine-figure bill.
Gensler Speaks Out on SPACs, Notes Similarities with Traditional IPOs and Hints at Future SEC Action
By Corey I. Rogoff on
SEC Chair Gary Gensler made news again last week with a series of statements regarding SPACs, noting their similarities with traditional IPOs and hinting at future regulatory action aimed at these investment vehicles.
In a December 9, 2021 speech before the Healthy Markets Association Conference, Chair Gensler addressed SPACs and how the SEC staff believes they can interact with three key SEC objectives: eliminating information asymmetries, protecting against misleading information and fraud, and mitigating conflicts of interest.
Ex-Nikola Chairman Indicted for Securities Fraud
By Corey I. Rogoff on
In April 2021, the SEC released several public statements that may have begun to cool a superheated SPAC market. FINRA soon followed suit, announcing in July 2021 a regulatory sweep aimed at SPACs. Now, for the first time, a criminal case has been filed in connection with a company that came to market as part of the 2020 SPAC explosion.
Supreme Court to Decide Whether Discovery Stays Apply to State-Court Securities Lawsuits This Fall
By Julia Alonzo on
One of the most significant differences between bringing a securities lawsuit in state versus federal court is the application of the mandatory discovery stay set forth in the Private Securities Litigation Reform Act (the “PSLRA”). Following the enactment of the PSLRA in 1995, federal courts must stay discovery in securities-law cases until after a complaint has survived a pleadings challenge, i.e., a motion to dismiss. State courts have been divided on whether such a stay is mandatory in securities-law cases brought before them as well. Now, a software company facing a challenge under the Securities Act of 1933 in California state court has been granted leave to argue before the United States Supreme Court that the PSLRA’s discovery stay equally applies in state courts.
FINRA Lives Up To Its Name, Announces Regulatory Inquiries into SPACs
By Corey I. Rogoff on
While 2021 has been exceptionally lucrative for SPAC sponsors – even more so than 2020’s “Year of the SPAC” – U.S. regulators appear emphatic that 2021 be the year of SPAC supervision. In April, the SEC released guidance on SPACs and related risks, highlighted by its novel argument that the entire lifespan of the SPAC – from IPO to deSPAC transaction – may be considered part of the offering for purposes of securities law liability. After this bombshell, it appears other regulators do not want to miss out on making their voices heard.
SEC Chair Gensler Testifies on “Unprecedented Surge” in SPACs
By Corey I. Rogoff on
SPACs remain on everyone’s mind, especially the country’s chief regulator. On May 26, 2021, SEC Chair Gary Gensler testified before the U.S. House Subcommittee on Financial Services and General Government on “key capital market trends” that will impact SEC resources in the coming years. And the very first topic he raised – Initial Public Offerings and Special Purpose Acquisition Companies – was of no surprise to most market watchers.