Professional collaboration software company Slack Technologies will soon be listed on the stock exchange, but there won’t be an IPO for this investment.
Slack is the latest company to take an alternative path to the stock market, choosing to go with a direct listing through the New York Stock Exchange. Direct listings provide some unique advantages for businesses, and they’re interesting for investors.
Here’s all you need to know about Slack and direct listing stock offerings.
What is Slack Technologies?
Slack Technologies develops collaboration software for SMBs and enterprise users. The software, simply known as Slack, offers instant messaging, audio and video conferencing, file sharing, and customized workgroup channels and rooms. Apps can directly integrate with it to improve productivity and workflow. More than 1,500 apps currently work with them, ranging from Google Drive and Dropbox, to Salesforce CRM software.
Slack has more than 6 million daily users. Businesses can use the service for free, but full functionality is unlocked through a premium tier, which is how the company generates revenue.
The company has traditionally been venture funded and has raised over $789 million since its founding in 2009. The company made over $200 million in revenue in the 2017 fiscal year, compared to $30 million in 2015.
Slack is currently valued at $7.1 billion, based on its most recent round of venture funding.
Why a Direct Listing on the New York Stock Exchange?
Direct listing (sometimes referred to as direct placement) is quite unique compared to an IPO. Businesses can go straight to the stock market without having to go through underwriters and investment bankers. This reduces the cost of going public. Purchasing stocks that are directly listed will essentially cut out the middleman.
Spotify (NYSE: SPOT) was the most recent high-profile direct listing. It went public in April of last year without problems. The stock now has a market capitalization of $25 billion, and the price has grown +23.40% since the start of 2019.
Slack reportedly has almost $900 billion in cash assets available to it, so it’s not exactly starved for cash. What a direct listing will do is provide the company with new capital, without interest, and without any fees that could come from a large IPO.
Slack’s huge revenue growth has made it one of the most promising companies in the tech industry. The company has reportedly filed documents with the SEC to allow its direct listing, which could happen as early as June this year.
This is a new stock for 2019 that investors should watch out for.
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