Slack could become biggest direct public listing since Spotify
Slack is reportedly planning on skipping a traditional initial public offering (IPO) in favor of going public through a direct listing, according to The Wall Street Journal, potentially becoming the second-biggest tech company to do so.
The company, which runs a popular workplace instant-messaging app, is expected to debut in the second quarter, according to the Journal, which cited people with knowledge of the subject. Although it expects to do so via a direct listing, its plans could change.
In a direct listing, companies are able to become publicly traded without a bank-backed IPO, which entails lining up large investors first and setting an opening share price.
According to TD Ameritrade, instead of raising new, outside capital (like an IPO), the company’s owners and investors can convert their ownership into stock, which is then listed on a stock exchange. Those shares can then be purchased by the general public, while existing investors can cash out at any given time without the so-called “lockup period” that generally prevents large investors from selling shares immediately after an IPO.
Spotify eschewed the IPO model when it went public in early August last year at $132 per share. By doing so, it dodged the hefty fees that are typically earmarked for banks. The direct listing, which was the only one of that caliber on the New York Stock Exchange last year, was seen at the time as a test for other companies tempted to list without selling new shares
Slack said last March that it has 8 million daily active users and 3 million paid users. In August, the four-year-old workplace said it had raised $427 million in funding, pushing its value to $7.1 billion, according to The New York Times.