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Slack Sued for Records Over App Outages After 2019 Market Debut

June 18, 2020, 7:37 PM

Slack Technologies Inc.'s directors were hit with a Delaware records lawsuit Thursday seeking to probe claims that they overstated the encrypted messaging platform’s capacity and reliability to inflate its stock before taking it public last year.

The suit targets the wave of app outages that plagued Slack after its 2019 New York Stock Exchange debut. The outages led Slack’s shares to tank when it emerged in September that the company had paid out $8.2 million in credits after failing to keep its pledge to offer “uninterrupted” service 99.99% of the time.

The stock was down about 60% in mid-March, but it has recovered in recent months, as the Slack app—long relied on by journalists and corporate executives—enjoys a boom related to widespread telecommuting during the Covid-19 pandemic.

The relatively sparse Chancery Court complaint invokes a state law giving corporate shareholders expansive inspection rights if they credibly suspect board wrongdoing.

It comes about two months after a shareholder derivative suit over the stock drop was filed in Delaware federal court and a securities class action got a green light in San Francisco.

Cause of Action: Section 220 of the Delaware General Corporation Law.

Relief: An order requiring Slack to turn over relevant books and records.

Response: Slack had no comment Thursday.

Attorneys: The plaintiff is represented by Rigrodsky & Long PA.

The case is Gillespie v. Slack Techs. Inc., Del. Ch., No. 2020-0483, complaint filed 6/18/20.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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