Slack’s IPO: What Every Investor Needs to Know — Investment U
by Peter Bosworth
Slack (NYSE: WORK) shares hit the market for the first time last week, and it was a success. Slack’s prosperous public offering reaffirms Wall Street’s affinity for young tech startups. For those unfamiliar, Slack is a cloud-enabled workplace messaging platform. Equipped with collaboration tools, Slack promotes group productivity using a sleek and modern interface. Slack’s IPO shows how office workers are fed up with email.
Share Price Movement Since Slack’s IPO
The day before Slack’s direct listing, the company had a reference price of $26. Slack opened on the NYSE on June 20 at $38.50, well above the reference price. Over the course of the day, the share price rose as high as $41.64 and closed at $38.62. When the market closed on the day of Slack’s IPO, 136 million Slack shares were traded. Slack’s most recent valuation is $19.5 billion, which triples the $7.1 billion valuation it sported as a private company. Since going public, Slack is more valuable than Lyft, Pinterest, Lime and Bird.
Slack’s Direct Listing
Slack opted for a direct listing to the NYSE rather than the traditional IPO, or initial public offering. Spotify blazed the trail for direct listing when it went public one year ago. The direct listing represents a shift in the evolving relationship between tech startups and Wall Street.
A direct listing essentially cuts out the bankers and connected Wall Street middle men. With an IPO, bankers sell new shares to clients the day before the company goes public. With a direct listing, existing shareholders can decide whether they want to put their shares on the free market. In other words, Slack didn’t create any new shares, it just increased the value of the existing ones by making them public. A direct listing isn’t viable for every company, but for well-known companies making a profit it is a solid a strategy.
Compared With Other Unicorns’ IPOs
Lyft
Lyft’s IPO was something of a disaster. On its second day of trading, the stock fell below its initial public offering price ($72) to close the day at $69.01. The main concern among investors is its unprofitability. The company lost nearly $1 billion last year. Even worse, through the first quarter of 2019, the company posted a loss of $1.14 billion. Lyft’s chief financial officer, Brian Roberts, said 2019 would be “our peak loss year and then we will move steadily toward profitability.” Lyft is spending heavily this year to expand into electric bikes and self-driving technology. It will take time for Lyft to see a return on those investments.
Beyond Meat
Beyond Meat’s IPO was the most successful of the year. The initial public offering price of $25 per share ballooned to as high as $180. The stock has fallen to $141, but that number is still nearly 6 times the initial public offering price. Beyond Meat plans to use its IPO money to increase production capacity. Investors are wondering whether Beyond Meat’s success is a fad, or if it’s here to stay. Only time can tell.
Airbnb
Airbnb’s IPO is yet to come, but investors are anxious for the company to go public. Profitability has been an issue for Airbnb, and a successful IPO could generate much-needed cash. Learn more about Airbnb Pre-IPO here.
Slack’s Subscriber Data
- Used by over 600,000 organizations
- More than 500,000 organizations are currently on a free subscription plan
- More than 95,000 organizations are currently on a paid subscription plan
- Paid customers increased by 49% over the last year
- Paid customers include more than 65 companies in the Fortune 100.
Slack’s IPO creates another opportunity for investors… but will it be a stock you can retire on? Here’s insight into Alexander Green’s Single-Stock Retirement Plan.
Good investing,
Peter
Originally published at investmentu.com on June 24, 2019.
