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Supreme Court sides with Slack, putting direct listings in jeopardy

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Re: Supreme Court sides with Slack, putting direct listings in jeopardy

#91

Post by usr1106 »

puzzledobserver wrote: post #23
nemothekid wrote: post #9

Earlier quoted context omitted.

I first came across this in Money Stuff[1], but the gist of it is, the unregistered shares came from employees selling their own shares. The reason it would not have happened with an IPO is because the employees would have been locked up. Everything else you said is correct. Now SCOTUS is saying that Pirrani cannot sue slack because he may not have bought shares directly from Slack. [1] https://www.bloomberg.com/opin…

Thanks! From the added context: 7. Pirrani's suit relied on Section 11 of the Securities Act. This alleges that the company lied in its registration document. 8. In an IPO, all shares are covered by the registration document. In a direct listing, the current shareholders of the company just start trading their shares on the market one day. 9. Notably, a direct listing makes it unclear which shares are registered (cov…

> 9. Notably, a direct listing makes it unclear which shares are registered (covered by the registration document) and which are unregistered. According to SCOTUS, Pirrani can't tell, so he can't prove standing under Section 11.

Right. If you read judge Gorsuch's statement quoted in the article a bit between the lines, he says: The Securities Act is a nonsense law in this aspect. If a company makes incorrect statements in a public listing and offer you shares they will be liable. But if you buy shares of the same company from someone else who owned the shares before the company was listed, the company is not liable for their wrongdoing. There is no reason why some shares of the same type of a single company deserve more protection than others depending on who was a previous owner. A dysfunctional law.

Re: Supreme Court sides with Slack, putting direct listings in jeopardy

#92

Post by amadeuspagel »

puzzledobserver wrote: post #6

Is it just me, or are newspaper articles surprisingly difficult to read? From what I understand: 1. Instead of a traditional IPO, Slack went public through an alternative process called a direct listing. 2. As part of its direct listing, Slack sold some million "registered" and some million "unregistered" shares. 3. What are registered and unregistered shares? I could not find an explanation on Wikipedia. 4. Fiyyaz P…

It's not just you, nor is it newspaper articles, it's that fucking website, sprinkling bullet points everywhere.

Re: Supreme Court sides with Slack, putting direct listings in jeopardy

#93

Post by tomp »

drumhead wrote: post #90

Time for Congress to step in and clarify the issue, which is unlikely considering how divided they are over everything. The only outcome is not to buy from a direct listing.

This is a bit of a stretch.

Congress is divided over divisive issues, and unified over other issues.

E.g. the first COVID legislation was passed in like 2 weeks. Hardly a sign of "dysfunctional legislators".

Re: Supreme Court sides with Slack, putting direct listings in jeopardy

#94

Post by [deleted] »

jholman wrote: post #35
nemothekid wrote: post #9

Earlier quoted context omitted.

I first came across this in Money Stuff[1], but the gist of it is, the unregistered shares came from employees selling their own shares. The reason it would not have happened with an IPO is because the employees would have been locked up. Everything else you said is correct. Now SCOTUS is saying that Pirrani cannot sue slack because he may not have bought shares directly from Slack. [1] https://www.bloomberg.com/opin…

Honestly it seems like the best practice is always just "read Money Stuff". I'm not a serious follower of financial news, but various things do come across my radar, and since I've subbed to the email version of Money Stuff (about a year now), I always feel like I'm a week ahead of everyone else (again, at this not-serious-follower level, not a week ahead of the folks who are genuinely in the know). Like all the Twit…

[deleted]

Re: Supreme Court sides with Slack, putting direct listings in jeopardy

#95

Post by tomatocracy »

koolba wrote: post #59
crazygringo wrote: post #39

Earlier quoted context omitted.

Sure for private shares. But what about public shares, which is what people are usually discussing? Do publicly traded shares not have serial numbers or identification numbers or something to that effect?

> Do publicly traded shares not have serial numbers or identification numbers or something to that effect? No they’re fungible. The vast majority are held as book entries in the DTCC[1]. Even if you pull them out of that system, they still don’t have an individual identification number like a bond’s serial number. [1]: https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...

> like a bond's serial number

Bonds are also typically fungible in the same way these days (including typically being held by a clearing house if they are traded).

Re: Supreme Court sides with Slack, putting direct listings in jeopardy

#96

Post by [deleted] »

djbusby wrote: post #76
DavidPeiffer wrote: post #54

Earlier quoted context omitted.

I've always been amazed at how much content he writes every day. Typically 3 topics, often quite different, with hypothetical situations added, laymen explanations of esoteric topics, legal arguments each side is likely to bring along with some of their pitfalls. Footnotes and other articles of interest are also provided.

The magic combination of skill, experience and good tools.

[deleted]

Re: Supreme Court sides with Slack, putting direct listings in jeopardy

#97

Post by diogocp »

dmurray wrote: post #86

I don't agree with the conclusion in the headline that this "puts direct listings in jeopardy". It should make them more likely. It makes them more attractive to companies, and less attractive to investors. And the companies are the ones making the decisions! Investors grumble about investor-unfriendly structures from public companies all the time: dual class stock, staggered boards, executive pay. But they suck it u…

> It makes them more attractive to companies, and less attractive to investors.

No, it also makes them more attractive for (real) investors.

Reminder that investors own the company, so when a parasite investor joins up with some class action lawyers to sue the company, they are just looking for a cash grab at the expense of all the other investors.

Re: Supreme Court sides with Slack, putting direct listings in jeopardy

#98

Post by cornfutes »

EE84M3i wrote: post #65
MacsHeadroom wrote: post #34

Earlier quoted context omitted.

> I always thought this was simply shorthand for something like: "I own shares #1034852, #1092647, and #2986246". Nope, (private) shares are almost always fungible and not numbered/serialized in any way. In fact most shares are just a name followed by a number of shares in an excel spreadsheet or Google sheet at best, if not simply a declaration in founding documents. > People sometimes own 0.25 shares of a company,…

> Usually fractional shares are calculated to the third or fourth decimal place. Does this mean that it's possible that the total number of shares people own doesn't add up exactly to the number issued?

You’re conflating floating point numbers with decimals.

Re: Supreme Court sides with Slack, putting direct listings in jeopardy

#99

Post by NoboruWataya »

dmurray wrote: post #86

I don't agree with the conclusion in the headline that this "puts direct listings in jeopardy". It should make them more likely. It makes them more attractive to companies, and less attractive to investors. And the companies are the ones making the decisions! Investors grumble about investor-unfriendly structures from public companies all the time: dual class stock, staggered boards, executive pay. But they suck it u…

I agree that direct listing aren't in jeopardy. But the points you mention are all symptoms of the low interest rate, tech bubble environment we have been living in for the last few years, where investors have been desperately throwing money at anything that promised a positive yield. Same with cov-lite loans. It's probable that we are entering a period where investors can afford to be more picky. So companies trying to avail of structures and processes that give them more protection at the expense of investors may find their cost of capital is higher.

Which is fine! Different processes to suit different issuer and investor risk profiles is no bad thing.

Re: Supreme Court sides with Slack, putting direct listings in jeopardy

#100

Post by quickthrower2 »

Spivak wrote: post #26
yieldcrv wrote: post #10

> "Naturally, Congress remains free to revise the securities laws at any time, whether to address the rise of direct listings or any other development. Our only function lies in discerning and applying the law as we find it." I really don't see how anyone that actually reads Supreme Court decisions calls this court illegitimate. They are very consistent about not being a super legislature, no matter how disruptive th…

I do, and do. Not for this ruling, this ruling was just stupid. The odds that not one single share he purchased was registered is 1 / pow(10, 57,287). After that we're just haggling over how many there are. The ruling that I, and most people, find to be damning is overturning Row. I don't give two shits about what you think of the actual issue. It doesn't matter if the previous ruling was wrong, the point of the cour…

I vouched this comment as I think there is an interesting point of view to consider, about the probabilities in particular.
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