Slack to use uncommon IPO method: report

Slack to use uncommon IPO method: report
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Workplace messaging platform Slack is set to use an uncommon listing strategy for its initial public offering (IPO) on Thursday, Reuters reported.

Using a direct listing, which differs from a traditional IPO in that it does not raise fresh funds, could likely yield a $16 billion valuation on the New York Stock Exchange.

The direct listing model was used by music streaming giant Spotify when it went public last year.

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“We think the jury is out on whether this is the right move or not,” Kathleen Smith, a principal and manager of IPO ETFs at Renaissance Capital, told Reuters. “Looking at Spotify, it takes a little time for the stock to get established after a direct listing.”

Slack's public debut comes shortly after the listings of ride-hailing companies Uber and Lyft, which both had disappointing starts to trading.

Spotify’s direct listing in April 2018 was perceived as a success at the time, with a healthy number of buyers and sellers. It is now trading at 15 percent below its initial offering.

Direct listings allow companies to decrease investment banking fees and avoid agreements that would otherwise prevent many current shareholders from selling stock.

Slack expects to pay $22.1 million in fees to its financial advisers for the listing, according to Reuters.

In comparison, Snap paid $85 million in commissions to banks for its 2017 IPO, which was worth about $31 billion at the time.