Shares of the workplace software Slack Technologies will be offered to the public for the first time Thursday, with trading targeted to begin at $26 a share on the New York Stock Exchange under the ticker symbol “WORK.”.
If Slack’s initial stock price rises, it would suggest Investors are eager to snap up shares of an innovative software company that promises to make communicating with your coworkers pleasant—even fun. If Slack’s first day of trading doesn’t live up to the hype, it would illustrate the challenges software startups face in a world dominated by tech giants.
Slack’s workplace software has developed a cult following in 5 years of existence—”I’ll slack you” is a common phrase today in a certain type of workplaces—and many are betting that it will become the dominant form of workplace collaboration. But it has nearly as many detractors as it does fans and now faces competition from deep-pocketed tech giants like Microsoft and Facebook.
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Going direct to the NYSE
With a target share price of $26, Wall Street was valuing the company at about $13 billion. While Slack has yet to turn a profit, its balance sheet is strong enough that the company chose to list its shares directly on the New York Stock Exchange rather than pursue a traditional initial public offering.
A direct listing bypasses many of the steps in a traditional initial public offering, including securing commitments from investment banks, attracting potential investors through a “roadshow” and pricing the shares before they start trading. It also doesn’t raise new funds for a company, making it only really viable for companies with plenty of cash on hand. Slack is only the second sizeable company to pursue a direct listing, following in the footsteps of Spotify last summer.
A direct listing “is viewed as a little bit riskier or more uncertain for a number of reasons, principally because you haven’t had this roadshow process, so it’s a bit harder to tell where the shares are going to open and at what price,” said Adam Augusiak-Boro, a senior research associate at EquityZen.
What does Slack do?
At its core, Slack’s software provides chat rooms divided into channels according to departments, projects or topics. Founder Stewart Butterfield has called it “a brand-new category of software,” and often talks about using it to replace email. “Like email (or the Internet or electricity), Slack has very general and broad applicability. It is not aimed at any one specific purpose, but nearly anything that people do together at work,” the company said in securities filings.
Slack is superior to email, the argument goes, because conversations within it allow for many participants and are public within a company, creating a permanent record of projects, processes or meetings. That makes it particularly useful for companies with a scattered workforce or particularly large companies. About three-quarters of companies with more than 10,000 employees use Slack, Marketplace reported recently.
“Slack has the potential to become one of the most significant enterprise software companies globally, reshaping how white-collar workers collaborate,” GP Bullhound said in a report.
Growth over profit
Slack has been growing rapidly, taking in $400 million in revenue last year for a net loss of $138 million. It’s one of the fastest-growing companies that has ever existed in the subscription-software space, according to technology analyst GP Bullhound. The company has about 95,000 paying customers today with many more free users.
Its success has attracted aggressive competition from Microsoft and Facebook, which could challenge Slack’s dominance going forward. Microsoft Teams became a standalone product last year, while Workspace at Facebook has snagged some large clients, like Booking.com and Nestle.
