A Look at the Slack IPO
Slack Technologies, Inc. is a game-changing and familiar company that’s been making waves around Silicon Valley and across the globe. With that, it’s no surprise that their upcoming IPO is cause for some buzz in the investment world.
Some of you might even be logged into Slack right now. If you’re not already familiar with the company, it provides a cloud-based messaging and file-sharing service that facilitates workplace collaboration. You can think of it as a hub that replaces email.
Anyone that’s ever worked on a project with a team of people while at work knows that email doesn’t always get the job done. Email is one-sided, and conversations can become buried under the pile of junk that constantly pollutes our inboxes. And most importantly, it is not conducive to a fluid conversation between a group of people.
The need for such a service was clearly there. Slack filled that void and has subsequently seen success, and is now taking the company public.
A Slack IPO has been filed with the Securities and Exchange Commission (SEC). The Slack IPO date is set for June 20th, 2019. (They’ve actually filed for a direct public offering, or DPO, which is explained below.)
Here are the details of the Slack stock IPO, including information on the Slack IPO valuation, price, date, and how to purchase shares of the IPO.
IPO vs. DPO
A company can “go public” in one of two ways: via an IPO or a DPO.
An IPO is more common and is likely the process most people think of when they hear of a company going public. To facilitate the IPO, an investment bank acts as the underwriter, determining how many shares to offer at what price. With an IPO, the investment bank buys the shares from the company and essentially resells them to their network of institutional investors and high-net-worth customers.
With a DPO, there is no investment bank acting as an underwriter. Slack is skipping the (big) step whereby a company works with an investment bank to do the underwriting of the deal and set the offering price for the stock.
Shares of Slack that are currently privately held will be sold directly to the public. That means that instead of buying shares from an investment bank, investors hoping to buy shares on opening day will be buying shares directly from private investors in the company. The price won’t be set by an investment bank, and will instead be set by the market forces of supply and demand.
Utilizing a DPO should save Slack on the costs of going public.
Naturally, there is plenty of debate about the pros and cons of IPOs and DPOs. On the one hand, an IPO can be expensive while a DPO may be lower-cost and considered more democratic. With a DPO, there is generally no stock “lock-up” period.
On the other hand, a DPO poses additional risks for the company. An investment bank may provide some stability in providing long-term investors, and guarantees some amount of promotion—which ideally means more sales. This risk could ultimately trickle down to the stock investors.
Details of the Slack IPO
The Slack IPO date via direct listing is set for June 20, 2019 . Shares of the stock will trade on the New York Stock Exchange under the ticker symbol WORK. (Originally, the stock symbol was SK, but this changed in Slack’s most recent filing.)
According to Slack’s May 20 S-1 filing amendment , up to 118,429,640 shares will be made available for sale to the public market.
Investors who purchase shares on the exchange will buy Class A common stock shares. Private investors hold Class B common shares. And if these private investors want to sell their shares, their Class A shares must be converted. The big difference? Class A shares will come with one vote per share, and Class B shares offer ten votes per share, essentially creating a hierarchy of power within shareholders.
The Slack IPO valuation and Slack IPO price (via direct listing) are hard to nail down because there is not currently a public market for the shares and no investment bank setting a price based on their perception of public demand. But, that hasn’t stopped investors from attempting to place a valuation on the value of the outstanding shares.
Investing in Slack
Due to the nature of Slack’s direct public listing, there is very little guidance on how trading for the stock will look in the early hours, days, and weeks. Because no official price will be set by IPO underwriters, Slack share prices are unpredictable and could be volatile. (Although even with prices set by bankers, IPO prices can be volatile.)
There is no denying that Slack has growing revenue and provides a service that workplaces find valuable. Slack currently has over 10 million daily active users “>10 million daily active users across more than 600,000 organizations in countries all over the globe. Two-thirds of the Fortune 100 use Slack. Over the last year, Slack has increased its customer base that pays over $100,000 by 84% .
But Slack is also not currently profitable, with their annual losses outpacing their annual revenue. In the fiscal year 2019, Slack had a net operating loss of $138 million .
Yes, revenue growth is strong, but that will only ultimately benefit investors if they’re able to cut back on expenses, grow their revenue beyond expenses or some combination of both. Whether Slack can turn itself into a profit powerhouse—not just a revenue powerhouse—remains to be seen.
That, and Slack has considerable competition in some behemoths. Microsoft has a similar product, called Teams, Alphabet, Inc. offers Google Hangouts, and Facebook and Cisco have launched similar products.
Companies like Microsoft or Google may have the advantage of larger budgets and the ability to bundle this service with other offerings. Slack hopes to set itself apart with innovative integration capabilities.
Building Your Investment Strategy
To buy shares of publicly traded companies, a brokerage account or an online trading platform is needed, like SoFi Invest. With SoFi Active Invest, you can buy and sell stocks free from any trading costs. Compare this to most brokerage firms, who will charge a transaction fee to place trades, which can eat away at returns.
Remember, any new investments should be considered in light of an overall diversified strategy and comprehensive financial plan.
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Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.
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External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.