initial public offerings (IPOs) trading on American exchanges

Thursday, June 20, 2019

Slack (WORK) began trading on the NYSE on Thur 20 June 2019

Slack directly listed its shares on the New York Stock Exchange, bypassing the usual fundraising process of an IPO and allowing shareholders to sell right away without a lockup period.
  • No lock-up for insiders next week 
  • A parallel for this unusual type of stock listing is Spotify Technology SA. The music-streaming provider went public using a similar maneuver last year, the last high-profile company to do so. Spotify’s stock is up 14% since then.
  • Goldman Sachs Group Inc., Morgan Stanley and Allen & Co. advised Slack on the listing, the same trio of banks that lined up when Spotify went public.
  • Opened for trading at $38.50.

Slack is an internet-based platform that allows teams and businesses to communicate with each other. It organizes discussions by topic and group, is similar to instant messaging chatrooms, and allows cooperation on documents and files.

Launched in 2013, Slack has replaced e-mail discussions at many companies, although e-mail is still the dominant medium of communication in workplaces.

Slack CEO Stewart Butterfield outside the New York Stock Exchange on Thursday morning. 


Slack Chief Executive Officer Stewart Butterfield said Thursday that the company chose not to have a traditional IPO for a pragmatic reason: It didn’t need the cash. “We’re not ideological crusaders on this stuff,” he said. The direct listing process is a more efficient way to price a stock, he said, “but I don’t think anything comes close to not having to dilute existing shareholders by 10%.”

Butterfield said he also wanted to avoid the lockup period. “Especially in a period when you’re locked up, when the supply is so constrained, the psychological impact of that can be a big negative,” he said. “Giving employees the option early is more important.”
Slack going public ends a long journey that started with Tiny Speck, a small video game maker. The company, led by Butterfield, was making a game called Glitch, but it didn’t take off. The team, however, had built an internal tool to chat and share files with each other. They had an inkling that the software could be useful to other teams. In 2014, they launched Slack. Now Butterfield, its co-founder and chief executive officer, is worth more than $1 billion.

One of Slack’s earliest believers was Accel, a venture firm that now owns about 24% of the company. Andrew Braccia, an Accel partner and Slack board member, had worked with Butterfield at Yahoo! Bloomberg Beta, the venture capital arm of Bloomberg LP, is also a Slack investor.

The service has spread from Silicon Valley into offices around the world, and it does much more than chat. Users can share files, build automated workflows, host video calls, poll colleagues and keep a to-do list. Those who use it tend to adapt quickly, but it has struggled to convey exactly what it is to most of the world, Butterfield said in a recent conference call. “We have to work hard to explain Slack to all the people who have never used it before,” he said. Butterfield called it “one of our biggest challenges and greatest opportunities.”

Slack faces competition from some of the world’s most valuable companies, including Microsoft Corp., Alphabet Inc. and Facebook Inc. Slack did prevail, however, over another rival: HipChat, a product from Atlassian Corp. Last year, Slack and Atlassian struck a deal in which Slack bought the assets for HipChat, which was eventually wound down, and Atlassian took a stake in Slack.

Ten million people use Slack every day, according to the company. Many workers rely on a free version of the software, but as of April, 645 companies paid more than $100,000 a year for the service. Those big customers make up about 43% of Slack’s revenue, the company said. Like other big-name public debuts this year, Slack is not profitable. It lost $139 million on $401 million of revenue in the fiscal year that ended in January.

In contrast to the flagrant cash burning of companies like Uber or Lyft, Slack’s losses have been fairly consistent. But its revenue growth rate has slowed from 110% two years ago to a projected 50% for the fiscal year ending next January.

SLACK valuation
2014: $1.2bn
2015: $2.8bn
2016: $3.8bn
2017: $5.1bn
2018: $7.1bn
2019: $17bn (IPO)

The San Francisco-based company, whose customers include Electronic Arts Inc, Nordstrom Inc and Ford Motor Co, said it ended the first quarter with 95,000 paid customers.

Slack had more than 500,000 organizations on its free subscription plan, as of Jan. 31.

As of April 30, Slack had 645 paid customers with over $100,000 in annual recurring revenue, an 84% increase from a year earlier, and these large customers accounted for 43% of its total revenue.

Slack also said it had over 10 million daily active users.

Its closest competitor is Microsoft Teams, a free chat add-on for Microsoft Corp’s Office365 users. Other similar platforms include Google Hangouts, Workplace by Facebook and Cisco Systems Inc’s Webex Teams.

The global market for workplace collaboration is expected to hit $3.2 billion by 2021, according to research firm IDC.

While Slack is not yet profitable, it’s got liquidity. The company reported cash and cash equivalents of $841 million in its most recent fiscal year, which is enough to keep the company going for nearly a decade based on its current pace of cash outflow.

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