Slack has officially gone public via direct listing on the New York Stock Exchange (NYSE), hitting the market at $26 per share, but quickly jumping to around $40 per share (at the time of publication).
On Wednesday evening, the NYSE announced that Slack’s reference price was set at $26 per share. However, because the cloud-based communications company did not choose to IPO, the $26 is not an offering price or an opening price. This means that the number was open to change, determined by the designated market marker, based off a calculation of a figure where buy orders can be met with sell orders, according to CNBC.
— M.G. Siegler (@mgsiegler) June 20, 2019
The shares ended up opening at $38.50 and quickly surged by more than 15 percent. New York Times reporter Erin Griffith indicated that the $37-38 per share would give Slack a market cap of at least $22 billion. Prior to the filing, the company was last valued at $7 billion USD, with its share prices set at $26 that company has been valued around $16 billion.
The other thing that differentiates Vancouver-founded Slack is that a direct listing means the company is not making any new cash from going public. By choosing this option, Slack does not have to pay underwriting fees that are typically associated with an IPO. A direct listing means that no new shares are created, rather, existing shareholders are able to sell their existing shares.
Direct listings are considered a low-cost option and can be undertaken for a number of reasons, either the company not having the resources to pay underwriters, not wanting to dilute shares, or looking to avoid lockup agreements (a legally binding contract between the underwriters prohibiting company shareholders from selling any shares for a specified period of time). However, Slack may be taking this approach simply because it already has a large amount of money, stated The Globe and Mail.
When looking at other technologies companies that have recently gone public, Slack is well set when it comes to cash on hand. Slack has more cash at hand than Pinterest, Lyft, Uber, Shopify, and Lightspeed. In its prospectus, Slack noted around $841 million USD in cash and cash equivalents, with a negative cash flow of $97 million USD in the recent fiscal year. According to The Globe, this means “if Slack continues to burn through cash at the same rate, it could survive more than eight additional years.”
Slack originally filed for a direct listing in Slack, deciding to sidestep the process of its long-awaited initial public offering (IPO). Slack originally filed under the symbol ‘SK’, but announced yesterday that it decided to list under the symbol ‘WORK’. Slack was previously expected to generate $500 million in revenue this year, according to the Wall Street Journal.