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Slack Technologies (NYSE: WORK) Went Public... Now What?

Written by Monica Savaglia
Posted June 25, 2019

I’ve written to Wealth Daily subscribers a few times about the messaging service company Slack Technologies (NYSE: WORK) and its potential public debut. Well, last week, it finally happened!

This was a public debut I’ve been personally following. I feel close to the company since as long as I’ve been working here and writing for you all, I've been using Slack’s messaging software as a way to connect and communicate with everyone at my office (and those who work remotely). And in my opinion, it’s been a lifesaver.

In my previous job, all our communication was done through email. Sometimes that meant long email chains were involved, or someone would accidentally hit “reply all” instead of just “reply,” or emails would get “lost.” It wasn’t entirely reliable, and it was a way for people to not hold themselves entirely accountable if they missed something in an email.

I think the co-founder and CEO of FloQast said it best when describing Slack’s platform: “Slack provides the virtual cubicle for connecting with your colleagues and sharing your ideas, regardless of location.”

Messaging a coworker about a project and having an actual conversation in real time is useful and helps get things done. Not only is it easier to communicate, but you can also share documents easily. A lot of companies have tried to connect businesses, but they didn’t have any luck.

Slack was able to provide an easy-to-use platform that looks nice and also provides other applications to be installed to streamline projects and keep everyone on the same page while also sending a relatable gif or emoji to lighten the mood. So when I heard that the company was thinking about going public, I was intrigued, and I wasn’t the only one.

Where It All Began...

Slack was founded in 2009. At the time, the company was called Tiny Speck, and it focused on the development of a multiplayer game, Glitch. But something in that game that really stood out was its instant messaging system. The founders changed their focus to improving the technology involved with the instant messaging system, and that’s how Slack was created.

Fast-forward to today, and Slack has more than 10 million daily active users worldwide. Those users average 90+ minutes of active usage per workday.

A partner at Unusual Ventures, Andy Johns, discussed Slack’s success:

Slack has been successful for a few reasons. The first is that it reimagined relatively the boring workplace communication tool and gave it a polished, fun experience that is more typical of a consumer messaging app. For anything to grow quickly, people must love to use it. Slack nailed the experience from the start.

By making Slack an enjoyable place to communicate with other people, the company was able to grow quickly and become the preferred messaging service for workplaces. Slack is flexible — it offers a free service, two paid plans for smaller companies, and an Enterprise Grid plan for larger companies.

Slack’s last funding round as a private company had the company valued at $7 billion. It raised a total of $1.4 billion from funding since becoming a company in 2009. Its recent backers included Dragoneer Investment Group and General Atlantic. Back in 2010, some of its investors included Accel and Andreessen Horowitz.

The company posted revenues of $134.8 million on losses of $31.8 million for the fiscal first quarter that ended on April 30. Its recent revenues are up 67% from the same period last year — a loss of $24.8 million on $80.9 million in revenue. According to Forge Global, a firm that matches private companies and their employees with investors, as of April, Slack was valued at nearly $17 billion on the secondary market.

Near the end of 2018, the company was teasing the idea of going public sometime in 2019. But it was a slow beginning of the year for the markets and especially for the IPO market because of the government shutdown. Then there was a ramp up in the IPO market, and we saw some big and highly anticipated IPOs come to light.

Those include Lyft (NASDAQ: LYFT), Pinterest (NYSE: PINS), and Uber (NYSE: UBER). These companies were lumped in with Slack because they are all popular tech companies. However, Slack decided to go against the grain — instead of taking the traditional IPO route, it decided to go public through a direct public offering (DPO).

Slack’s Direct Public Listing

A DPO, also known as a direct listing, means there are no banks underwriting the offering and no new shares being sold. That means the company will not receive any additional money for operations. Basically, a direct listing is a way for existing shareholders to get liquidity by registering their shares for sale on the public market.

Since there are no new shares to be sold and Slack wasn’t aimed toward making more capital from its public offering, it didn’t have to market itself and do the typical “road show” that comes with a normal IPO. The company already has more than $800 million in cash on hand. Deciding to do a direct listing saves the company money, especially since it won’t be paying millions in fees to the banks that would be underwriting the IPO.

Slack made its direct listing on Thursday, June 20, on the New York Stock Exchange (NYSE) under the symbol “WORK.” It opened up that morning at $38.50. The NYSE set a reference price of $26 the night before. Just at open, Slack surged almost 50%! That puts Slack near a $19.5 billion market cap.

As of the start of this week, on Monday, June 24, Slack opened up the market at $36.32. It’s still trading above that reference price of $26. As always, it takes some time to see how hyped-up companies like Slack settle into the market. Slack has been rapidly growing over the past few years, and it looks like it’ll remain on that path for growth.

The IPO Market Is on Fire

It’s been an amazing year for companies to go public. We’ve seen some huge gains from these companies and their public debuts. Take a look at some of the IPO gains we’ve seen this year so far:

  • In April, Zoom Video Communications (NASDAQ: ZM) went public with an IPO price of $36 and is up around 177%.
  • In April, PagerDuty (NYSE: PD) went public with an IPO price of $24 and is up around 120%.
  • In May, BeyondMeat (NASDAQ: BYND) went public with an IPO price of $25 and is up around 504%.
  • In June, CrowdStrike (NASDAQ: CRWD) went public with an IPO price of $34 and is up around 108%.

Usually the summer months are pretty slow, but that is not the case this year. The next big IPO is just around the corner. You don’t want to miss out on the opportunity to be one of the first to know all about it. Click here to learn more. Just imagine the doors that will open up because of the knowledge you’ll have before anyone else.

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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