b'there were far more unregistered shares availableclaim because defendants are not statutory sellers. (approximately 164.9 million) than registered onesInstead, relying on U.S. Supreme Court precedent, it (approximately 118.4 million) when Slack went publicheld that the defendants could be statutory sellers by that could be sold regardless of whether Slack filed theactively soliciting the sale of securities, which plaintiff Registration Statement. Second, defendants contendedadequately pled as to the individual defendants through that it was essentially impossible for plaintiff to pleadallegations that they solicited sales at a Slack-hosted that defendants sold shares directly to him, as requiredan investor day, signed the Offering Materials, and were by Section 12(a), because the sales were made throughfinancially motivated to solicit sales (many of whom sold brokerage transactions. Third, defendants arguedstock through the direct listing). that there can be no damages because there wasTurning to the alleged misstatements and omissions, no offering price. Defendants also asserted the morethe federal court found that plaintiff adequately alleged traditional grounds for dismissal that plaintiff failed tomaterial misstatements or omissions as to challenged plead that any of the challenged statements were falsestatements relating to Slacks service outages and the or misleading. SLAs, agreeing with plaintiff that defendants failure On April 21, 2020, the federal court granted defendantsto disclose the unusual SLA terms may have been motion to dismiss in part and denied in part, rejectingmisleading because that could be a significant factor[ ] defendants primary argument regarding lack ofthat make[s] an investment . risky. It further held that, Section 11 standing. The court noted that, becausealthough the question of whether the seven months of the SECs changes to the direct listing process,of outages in 2018 constitute a trend required to be this case presented a question of first impression,disclosed by Items 105 and 303 of Regulation S-K is a but acknowledged that many courts, including thefactual inquiry for a later stage of these proceedings, it U.S. Court of Appeals for the Ninth Circuit, previouslyis plausibly pled that Slack was aware of those outages required a clearly traceable connection to theat the time of its disclosures, and that future outages Registration Statement for Section 11 standing. But inwould have an unfavorable impact . on revenues those circumstances, shares offered in connectiondue to the SLA terms. The federal court also rejected with the Registration Statement were not on thedefendants argument that omission of SLA terms from market at the same time as shares offered by earlythe Offering Materials was immaterial because they investors so a plaintiff had a limited window in whichwere already publicly available on Slacks website, they could feasibly prove traceability. Here, theholding that the substantial stock price following the federal court noted, shares offered in connectionSeptember 4 announcement indicate[d] the materiality with the Registration Statement and unregisteredof this information to investors sufficient to survive at shares held by early investors were offered for salethe pleading stage. on the same day, making traceability impossible. As aThe federal court deemed the rest of the challenged result, the federal court concluded that in this uniquestatements inactionable. The court concluded that circumstance of a direct listing where unregisteredthe Offering Materials provided sufficient information shares are simultaneously sold, there was goodregarding competitors and Slack had no duty to reason to deviate from longstanding precedentdisclose data or comparisons of Microsofts metrics. narrowly interpreting Section 11 standing for anyLikewise, the court found that defendants statements purchaser acquiring such security in favor of a broaderregarding its key benefits and scalability were not standard where standing exists if the plaintiff purchasedmisleading. In particular, the court noted that general securities of the same nature as that issued pursuantstatements, such as that Slack buil[t] [its] technology to the registration statement. The federal courtinfrastructure using a distributed and scalable explained, [a]pplying the narrower reading of sucharchitecture were not misleading purely because the security in the context of Slacks direct listing wouldcompany experienced difficulty scaling, especially cause the exemption provision of [the Securities Act] towhere it disclosed in its Offering Materials that it may completely obviate the remedial penalties of Sectionsnot be able to scale our technology to accommodate 11, 12 and 15 and would certainly lead to a futile resultincreased requirements. Finally, the court stated that at variance with the policy of this remedial legislation.plaintiffs failed to plead facts contradicting statements The federal court also disagreed with defendantsabout key benefits and Slacks growth strategy and that argument that dismissal was appropriate becausethey were inactionable puffery. plaintiff could not show an offering price from the directIn light of its ruling that at least the statements listing, which is a predicate to damages, holding thatconcerning SLAs and outages were actionable, the damages are not an element of a Section 11 claim. federal court concluded that plaintiffs Section 15 claim The federal court rejected defendants contentionsurvived because control was also adequately pled. that plaintiff lacked standing to bring a Section 12(a)(2)Specifically, the court held that the following allegations 23'