Market Overview

Slack's IPO: What You Need To Know

Slack's IPO: What You Need To Know

Slack Technologies, a provider of a cloud-based workplace messaging app, launched its product in 2013 and is now reportedly looking to go public at a valuation of around $7 billion, according to The Wall Street Journal.

What Happened

Sources close to the matter told WSJ that Slack is looking to follow Spotify Technology SA (NYSE: SPOT)'s path to become a public company: a direct listing. The process differs from a traditional IPO and foregoes the underwriting process, which typically involves investors buying the stock at a predetermined price.

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Instead, Slack could list its stock directly on an exchange, where the open market will play a bigger role in dictating its value. The company was most recently valued at $7.1 billion as part of a fundraising round with Japan's SoftBank in 2017.

Why It's Important

The timing of Slack's potential IPO has broader implications for the future of IPO listings, WSJ said. Bankers on Wall Street miss out on hefty underwriting fees in the event of a direct listing.

In Spotify's case, the three major banks that advised the music streaming company shared a pool of $36 million in fees. 

Since a direct listing IPO foregoes the traditional process, the company isn't raising any new capital in the process.

Companies in need of cash from a public offering will have no choice but to pursue the traditional process.

What's Next

WSJ's sources said Slack expects to be valued "well in excess" of $7 billion if it proceeds with the plans, although under a direct listing there is no guarantee the market will agree with the figure.

Related Links:

Spotify Is Going Public: What Does It Mean For The Music Business?

The Unicorns Most Likely To Test IPO Waters In 2019

Photo courtesy of Slack. 

Posted-In: direct listing Softbank Wall Street JournalNews IPOs Media Best of Benzinga


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