The so-called direct listing, which differs
from a traditional IPO in that it does not raise fresh funds,
will put on trial a method pioneered last year by music
streaming business Spotify Technology.
"We think the jury is out on whether this is the right move or
not," said Kathleen Smith, a principal and manager of IPO ETFs
at Renaissance Capital. "Looking at Spotify, it takes a little
time for the stock to get established after a direct listing."
Slack's debut follows a spate of much anticipated 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 avoids agreements
that would otherwise prevent many current shareholders from
selling their stock.
Slack's direct listing could have implications for other large
technology companies such as Airbnb, which is considering going
public through a similar approach, a person familiar with the
matter said.
The New York Stock Exchange on Wednesday set a reference price
of $26 per share, indicating a value of around $16 billion. The
reference price is not a trading price but is used in the
process of building a book of orders.
For its listing, Slack expects to pay $22.1 million in fees to
its financial advisers. By comparison, banks earned $85 million
in commissions from the 2017 IPO of Snap Inc, which was worth
about $31 billion at the time of its public listing.
Spotify's direct listing in April 2018 was perceived as a
success at the time, with a healthy number of buyers and
sellers.
More than a year after going public, Spotify's stock is trading
around 15% percent below where it debuted as the music-streaming
company sacrifices profit margins to generate growth.
"Direct listings are still a pretty new vehicle. It's really
interesting to see how that evolves," Fiverr Chief Executive
Micha Kaufman said in an interview last week after the
Israel-based company went public.
"But it's definitely more appropriate for companies that have
raised larger sums for longer periods of time in the private
market, and are really wanting to give their investors an upside
or an exit."
San Francisco-based Slack reported revenue rose more than 80
percent to $400 million in 2018, when its losses from operations
were $143.85 million. It has more than 90 million users but so
far has only around 100,000 paid customers.
Slack had around $295 million in total cash or cash-like assets
at the end of April and has raised around $1.2 billion so far
from private investors, according to data provider PitchBook and
the company's regulatory filing.
(Reporting by Joshua Franklin and Carl O'Donnell in New York;
Editing by Cynthia Osterman)
[© 2019 Thomson Reuters. All rights
reserved.] Copyright 2019 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|
|