
In its June 2023 decision in the Slack case, the United States Supreme Court held that, order to establish standing, Section 11 plaintiffs must plead and prove that the shares they purchased in a direct listing offering are traceable to the allegedly misleading registration statement. However, as I noted at the time, while the Court was clear that Section 11 plaintiffs must establish traceability, the Court had little to say about what is required to establish the tracing.
In a recent ruling in a securities lawsuit against Palantir Technologies, which went public in a direct listing, the Court granted the defendants’ motion to dismiss the plaintiffs’ Section 11 claim, after finding that the alternatives the plaintiffs proposed to try to establish tracing were insufficient. The practical implication of the Court’s decision is that the strict tracing requirements may, as an April 16, 2025, memo from the Paul Weiss law firm put it, “effectively insulate companies that go public through a direct listing from Section 11 liability.”Continue Reading High Bar to Establish Section 11 Standing for Direct Listing Purchasers