Slack stock surges at debut, values company at over US$25B
Shares of Slack Technologies Inc, the fast-growing workplace messaging and communication platform, soared nearly 50 per cent in their public trading debut on Thursday, valuing the company at more than US$25 billion.
The strong performance helped validate the unusual direct listing model the company used to go public. The stock soared to more than US$41 at midday on Thursday from the New York Stock Exchange’s reference price of US$26 apiece. It ended the day at US$38.62, up 48 per cent.
Slack went the unusual route of a direct listing, different from a traditional IPO because it does not raise fresh funds. Slack’s listing tested the method pioneered last year by music streaming business Spotify Technology SA.
Slack’s trading price gave it a valuation of more than 50 times revenue.
That multiple is lower than for other tech companies’ IPOS like Zoom Video Communications Inc, which trades at 88 times revenue, but is very high considering that Slack is not yet profitable, said Kathleen Smith, a principal and manager of IPO ETFS at Renaissance Capital.
“They are going to have to do an awful lot to get the company’s fundamentals to justify that kind of valuation,” she said.
Slack’s listing opened with about 40 million shares trading to outside investors, providing better-than-expected liquidity for the stock, a person familiar with the matter said.
The debut follows a spate of high-profile technology IPOS, some of which, including Uber Technologies Inc and Lyft Inc, had disappointing starts to trading.
The direct listing model offers Slack an opportunity to save significantly on investment banking fees and avoid restrictions on insider stock sales.
“We think a direct listing is a more effective and efficient way to get to a normalized level of supply and demand without the constraints of an IPO,” said Allen Shim, Slack’s chief financial officer.
Slack’s direct listing could have implications for other large technology companies such as Airbnb Inc, which is considering going public through a similar approach, a person familiar with the matter said.