Everything You Need to Know about the Slack IPO

It’s going public June 20th, but is it another Uber disaster in the making?

Ten years after it was founded, Slack Technologies listed its shares on the New York Stock Exchange on Thursday, June 20th. The ticker symbol? WORK. And the NYSE has set Slack’s stock reference price, which may help determine where it starts trading, at $26 a share, valuing the company around $15.6 billion.

But in contrast to the vast majority of tech companies that go public using an initial public offering, or IPO, Slack will use a direct offering.

Slack’s workplace collaboration software is used by 600,000 companies and organizations, and is considered by many to be an indispensable alternative to older means of communications like email. For small investors anxious to own a piece of the company that plays a big role in their workdays, Slack’s stock debut presents an intriguing opportunity. Here’s how the direct offering will work.

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Direct offering vs. initial public offering

Slack is going public through a direct public offering, also known as a direct listing. It’s a more obscure alternative to IPOs that few large companies considered before Spotify staged its direct offering in April 2018.

In an IPO, a company works with a group of underwriters, typically several Wall Street investment banks. Underwriting a financial asset guards against financial risk. (The term “underwriting” comes from the archaic practice of writing one’s name under the amount of risk taken on marine insurance policies.) In the case of a stock offering, underwriters agree to hold any shares they aren’t able to sell to investors through the offering.

Slack, like Spotify, is working with Goldman Sachs, Morgan Stanley, and Allen & Co. to list its shares directly on the NYSE, but not as underwriters.

Before an IPO, underwriters stage a roadshow with institutional investors to discuss a company’s financials and outlook. In the process, they assess demand and determine an initial price for the stock once it begins trading on an exchange. In contrast, direct offerings are priced by the stock market itself.

Before the stock begins trading, the stock exchange determines an “initial reference price.” Spotify’s reference price, for example, was $132.50 a share, at the high end of its trading range during the previous three months on private secondary markets. Slack’s reference price will be $26 a share, the NYSE saidlate Wednesday, which is right in the middle of its $21 a share-to-$31.50 a share range on private markets during the last three months, according to Slack’s S-1 registration statement.

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