Dive Brief:
- Slack is reportedly eyeing a direct listing over a traditional initial public offering, following in the steps of Spotify's public debut last April, according to a Wall Street Journal report Friday.
- The office software provider is favoring a Q2 debut, and hoping to maintain its valuation of more than $7 billion, sources told the Journal. The direct listing would allow the open market to set the price of shares instead of the direct issuer doing so ahead of the trade date, essentially bypassing the underwriters and investment banks in the IPO process.
- Slack is working with the same trio of financial advisors — Morgan Stanley, Goldman Sachs and Allen & Co. — that helped Spotify with its direct listing, according to the Journal.
Dive Insight:
Slack is slated to have one of the most anticipated business technology IPOs of 2019, and as a company known for disrupting the office communication and collaboration market, sidestepping the traditional IPO path is perhaps fitting.
Spotify benefited from being the first, and companies following suit might face different expectations and results. Airbnb is also rumored to be eyeing a direct public offering.
With a direct listing, there is some concern that prices will fluctuate wildly as the market determines what a company is worth, said Brad Weber, partner in Goodwin's Technology Companies and Capital Markets practice groups, in an interview with CIO Dive in May. Spotify is a very well known brand and the unique process worked for it, but it is unclear if a similar offering structure would work well for smaller companies.
Slack is widely known in the enterprise market — though the office staple certainly has some degree less of brand recognition than the leading music streaming service.
The IPO is a branding and fundraising event for many companies, but for big brands like Spotify, they don't need the attention as much, according to Rick Kline, partner and co-chair of Goodwin's Capital Markets Practice and Technology Practice member, in an interview with CIO Dive in May.
