Slack IPO 2019 vs Slack Direct Listing
Slack Technologies, Inc., the collaboration tools giant used by workplaces across the world, is looking to have an initial public offering (IPO) in 2019, reports say.
While the exact Slack IPO date and Slack IPO price are not known, here’s what we do know: this will likely not be a traditional initial public offering. Instead, Slack is looking to sell shares via a direct listing, according to reports. (Source: “Message Platform Slack Moves Ahead Amid Direct Listing Plans,” Bloomberg, February 4, 2019.)
A direct listing is a distinct way of hitting the market, one which is more focused on granting liquidity to early investors and employees rather than raising money, which is what a more traditional IPO is often used to accomplish.
A direct listing precludes a company from offering new shares for sale (and by extension, helps prevent dilution) but also allows the company to avoid those expensive underwriting fees and allows current investors to sell without a lock-up period.
Reports say that the company is choosing a direct listing because it does not need cash or publicity at this time, but the source did also say that plans could change.
This is not wholly unprecedented, as Spotify Technology SA (NYSE:SPOT) made a similar move in April of last year.
Direct listings tend to be less volatile as a result, with less chance for wild swings in either direction (although it’s not impossible).
Again, the Slack IPO date and Slack IPO price are both up in the air, with reports stating that the company is eyeing spring or mid-2019 to hit markets.
Let’s take a deeper dive into what we do know about Slack.
Slack IPO Valuation
The reports coming in have the Slack IPO valuation at about $7.0 billion, although some have said that the company is seeking as high as $10.0 billion.
In August, the company raised $427.0 million in a funding round with a valuation of $7.1 billion. (Source: Ibid.)
The hard numbers, in any case, support Slack’s case for it being among the premier messaging apps.
In January, Slack said it had 10 million users on its service every day. In 2018, three million of those users paid for the premium version.
Other rivals looking to challenge it in the space have fallen by the wayside or otherwise been left in the wake of Slack’s success.
This success is reflected in the company’s growth, surging from 22 employees in 2011 to more than 1,000 today. (Source: “Slack to go public in one of the first major IPOs of 2019,” Quartz, February 4, 2019.)
As for the company not needing cash, that appears to be backed by the numbers; the company had $900.0 million in cash on its balance sheet as of October 2018. (Source: “Slack’s Financials Ahead of Listing Plans,” The Information, January 15, 2019.)
The report also stated that Slack is looking to be cash flow positive for the 12 months through January 2020.
The report went on to state that for the year ended January 2018, Slack had revenue of $221.0 million, with projections to see that number increase by 76% in 2019, followed by a jump of 64% the following year to $640.0 million.
Slack may be the first of the major Silicon Valley IPOs this year, with several other major names (Uber, AirBnB, Inc.) similarly looking to go public.
While Slack Technologies Inc’s move for a direct listing is going to dampen some of the potential gains for the company on its listing date, overall, the numbers are very solid and the company is showing immense patience and maturity with this move.
Having coffers of near-$1.0 billion doesn’t hurt things, either.
All considered, I believe that the Slack IPO could be a big winner in 2019, although there is a better chance that we’ll see muted gains when it lists.
More importantly, however, I believe that this could be a very good long-term stock, with room to grow for years to come.