Yesterday, Slack Technologies confidentially filed with the Securities and Exchange Commission to go public in the U.S. for listing its shares publicly. The company would go with a direct listing in the stock market and might get into a race with Lyft, Uber, and Airbnb to become the next major company to use the non-traditional method for an Initial Public Offering (IPO) after Spotify. Last year Spotify decided to sell its shares in an IPO directly to regular people rather than to a pre-chosen group of its bankers’ friends in a move which is known as a direct listing.
A company that opts for direct listing doesn’t create or sell any new stock and therefore doesn’t raise any money but current shareholders sell their preexisting shares. Slack had about $900 million in cash on its balance sheet as of October 2018, according to The Information. Last year, in December, Slack hired Goldman Sachs to lead its IPO as an underwriter and was seeking a valuation of more than $10 billion in its IPO as reported by Reuters. According to a report by Crunchbase, Slack has raised about $1 billion so far.
The global growth concerns and U.S.-China trade issues have an impact on the equity markets. Many companies have pulled IPOs from the markets, stating “unfavorable economic conditions”, with the number rising since the U.S. government shutdown. It would be interesting to see what step the company takes.
According to few users, this move will be beneficial for Slack. One of the comments on HackerNews reads, “Nothing is wrong with the market: Slack may have decided that this is the best way for them to create liquidity. There is also a cap (2000) on the number of shareholders a company can have before they have to abide by what amounts to the same reporting requirements as a publicly traded company. Slack also get the advantage of the usual market pop of acquiring companies share prices that usually amounts to a significant % of the cash value of the transaction.” According to few others, the company will have huge leverage with stock compensation it would be able to buy other companies because of the access to funding.
To know more about this news, check out the official press release.