Business communications and software company Slack Technologies Inc. (US: WORK) has ended its first day of trading with a valuation around $20 billion. This is almost three times the valuation that the company received before going public.
The company, which arrived on the stock market with a direct listing, is now one of the most valuable businesses in its industry.
Huge Investor Confidence for Slack Technologies
Stock hit the market on Wednesday trading at a price of $38.50. This was 48% higher than the reference price of $26 that was set earlier this week. Stock finished the day at $38.62, leaving it with a market capitalization of $19.5 billion. When Slack was last valued in 2018, it was worth just $7.1 billion.
Slack is the latest technology company to have a high profile entrance on the stock market. However, unlike many of its peers, this company chose to go with a direct listing rather than a traditional IPO. There are currently 194 million Class A shares and 310 million Class B shares in circulation.
Although it has only been on the market for a single day, analysts believe that Slack could fare as well, if not better than some recent technology listings.
- Zoom Video Communications Inc. (US: ZM) is a video and text messaging company that has grown 34.16% in the last 30 days.
- CrowdStrike Holdings Inc. (US: CRWD) is a cloud software holding company that has grown 16.66% in the last five days.
Like Slack, these companies came to the market with direct listings. Tech-minded investors see a lot of potential in next-generation software companies, especially those that provide highly monetizable services.
Slack focuses on business and enterprise markets, providing a communication and collaboration platform. The company offers its core services for free, while generating revenue from large customers who pay for premium subscriptions. It has high long-term earnings potential, so it is not surprising that investors have responded well to the direct stock listing.
Will Slack Be Able to Maintain Momentum?
Slack’s revenue increased 82% in 2018, exceeding $400 million. Growth was slower in the first fiscal quarter of 2019, with revenue up 67% year over year. Despite the growth rate decline, this is still an impressive figure for any company.
The plans to implement new strategies that will entice up to 500,000 free customers to pay for subscriptions. If Slack can achieve the right value proposition, its long term revenue generation capabilities will be up with the best in the software business.
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