By CultureBanx Team
- Slack is planning a direct share listing on the NYSE instead of a traditional IPO
- The company’s tech workforce is 5.5% black
One of Silicon Valley’s most diverse tech companies is taking its talent to the NYSE through a direct share listing. Slack, the messaging software giant is following the path set out by a few other businesses that have decided to side step the traditional IPO process. Armed with a tech workforce combination that’s 5.5% black, 7% Latino and 4% mixed-race, along with a $7 billion valuation the company could be one of the biggest to enter the public markets this year.
Why This Matters: Slack doesn’t need the publicity or the capital that comes with a regular IPO, a person familiar with the matter said. Even though they don’t need those things to go public, perception is still very important to the company. As the messaging platform continues to strive to better represent its customers internally, they’ve ramped up diversity efforts ahead of their anticipated IPO. Overall, diversity in tech is way below all private industries in the U.S., with blacks making up 7.4% of its workforce compared to 14.4% across all private industries.
If we drill down into how Slack can benefit from this direct listing, we’ll find it’s the easiest way to let employees cash out quickly. Also, they are already a household name making it easy for the company to generate investor interest without the fanfare of a roadshow.
Spotify completed a direct offering in April 2018 on the NYSE and perhaps inspired Slack to do the same thing
Spotify (SPOT -2.75%) completed a direct offering in April 2018 on the NYSE and perhaps inspired Slack to do the same thing. Their pre-trading initial reference price by the NYSE was $132 per share and the opening price was $165.90 per share, approximately 25.7% higher than the NYSE reference price. Slack is hoping to capture some of that same magic, and the Wall Street Journal reported they are working with Goldman Sachs, Morgan Stanley and Allen & Co. on the deal. These three companies served as advisers on Spotify’s direct listing as well.
Situational Awareness: Since Slack won’t have to pay fees to investment banks during its anticipated Q2 market debut, they will be able to get a quicker sense of the true market value of the company. Normal IPOs are intentionally set below market so there’s a huge “pop” on the first day of trading. Typically, the stock price will reset after the contractual lockup period expires, freeing up more people to sell. As of March 2018, the average first-day return for 2018 IPOs was 13.2%, according to a Harvard report.
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