Slack IPO Priced At $26 Per Share

Enterprise communication company Slack Technologies is making its stock market debut on Thursday with a reference price per share at $26.

The Slack IPO will have a direct listing on the NYSE with the current stock offloaded for trading without raising any additional fund or issuing new shares.

In the public listing on the NYSE, the company’s reference price will be $26 per share. But that does not mean Slack’s Class A shares will have to open at that price at the start of trading.

Based on the current reference price per share, the company’s valuation will go to $15.7 billion.

The ticker will be WORK.

The direct listing avoids the services of underwriters like banks. This reduces costs and savings accrue from the fees payout going to banks that are an average 4 percent of the gross proceeds.

According to company filings since May, Slack’s shareholders have been converting their Class B shares into publicly tradable Class A shares.

As of June 13, Slack has 181 million Class A shares that will be available for trading Thursday.

For Slack, Morgan Stanley will help open the stock and deal advisers also include Goldman Sachs Group and Allen & Co.

How does direct listing differ from traditional IPO?

Spotify IPO sought a direct listing in last April. But the practice is still rare among startups tapping public markets for liquidity enhancement.

In a direct listing, no IPO price will be set or data compiled on who buys the stock the night before trading as in traditional IPOs.

The reference price in a direct listing is just a guidepost on where trading would open. A lower reference price is advantageous as it would help the stock to trade high and investors would be excited to see an initial pop.

But the flipside is, unlike a typical IPO, the direct listing has no support from underwriting banks as stabilizing agents to prop up the share price, in case it plunges in early trading.

The direct listing also skips the traditional roadshow where company executives and bankers travel to major cities to interact with fund managers to stimulate interest in the IPO.

Vital stats

According to a company filing, Slack has a user base of more than 10 million and cumulative weekly usage is more than one billion messages and 50 million hours.

Nearly 600,000 organizations use Slack in which 500,000 organizations are on free subscription.

There are 95,000 organizations as paid customers as of April 30, 2019. There has been a 49 percent surge in paid customers in the latest fiscal year vis a vis the previous year.