Cloud-based collaboration software service provider Slack Technologies is finally going public after ten years of active operation. Instead of going through the usual initial public offering (IPO) like other tech startups, Slack has decided to list its shares on the New York Stock Exchange through a direct offering listing.
The company will be listed on the NYSE under the ticker symbol, WORK. The exchange announced this week that Slack's stock reference price will be around $26 per share. This will essentially value the company at around $15.6 billion.
UPDATE: A day after its debut, Slack stocks surged by more than 60 percent, ending the day at $38.62 per share. This elevated the company value close to $23 billion.
As previously mentioned, Slack chose to be listed on the exchange through a direct offering listing. This particular method of getting listed is quite uncommon, at least for large tech firms. The last company to list this way was Spotify, which went public through direct offering in April of last year.
The main difference between the two methods of listing on exchanges is how stocks are offered and who handles the shares. In an IPO, companies work together with investment banks who act as its underwriters. These banks hold any shares that aren't sold to investors. An IPO also offers the public newly minted shares to add to existing shares. Lastly, IPO prices are determined by an assessment of the company's financials and outlook. This is referred to as the company's initial IPO price.
For direct offering listings, a company will sell only its existing stocks. Stock prices, termed as a company's reference price, are determined by the exchange and the stock market itself. Companies will still be working with banks, but they do not act as underwriters. Slack chose to work with Morgan Stanley, Goldman Sachs, and Allen & Co for its direct offering.
Slack likely went to the direct offering route in order for its existing shareholders to have the option to sell their shares immediately. Shareholders such as employees, investors, and venture capital firms will be able to sell their shares when the company goes public this month. IPOs usually restrict any selling of shares until six months after a company goes public.
Slack likely also wanted to lower its initial costs with the direct offering. IPOs do include significant underwriting fees, often reaching up to 7 percent of the total proceeds of the IPO. Going with a direct offering also means that Slack no longer has to go on a roadshow.
This is unnecessary for the company as most investors are likely already very familiar with the company.
Slack's software is currently being used by over 600,000 companies and organizations worldwide. The collaboration software the company provides has become an indispensable tool for a lot of companies.