Slack soars 50% above its reference price in unorthodox public offering
- Slack shares soared by nearly 50% on Thursday on the New York Stock Exchange, opening at $38.50 per share after the exchange set a reference point of $26 a share the day prior.
- The company debuted through an unusual “direct-listing” process, as opposed to a traditional initial public offering.
- Slack’s public debut is the latest in a long line of multibillion-dollar money-losing technology companies to hit the stock market in 2019.
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Shares of the workplace-messaging app Slack jumped 50% above their reference price on Thursday on the New York Stock Exchange. The company is the latest high-profile unprofitable technology firm to make its public debut this year.
Slack opened for trading at $38.50 per share, a 48% rise from its $26-a-share reference pricing the exchange set on Wednesday. The company went public by way of a an atypical “direct-listing” process, as opposed to the traditional route of an initial public offering.
With Slack’s opening gains just after 12 p.m. ET, it’s valued at just under $20 billion, according to a Bloomberg estimate. The stock trades under the ticker “WORK.”
While Slack’s sales growth has proved robust, it’s losing millions of dollars, which is not uncommon for a young technology company. It expects revenue growth to effectively double in 2020 to between $590 million and $600 million, according to its quarterly earnings report filed earlier this month.
Still, Slack reported an operating loss of $33.8 million in its first quarter, a wider loss compared with the same period last year, and said it expected its adjusted operating loss for 2020 to come in between $182 million and $192 million.
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Slack is the second notable company to go public by way of a direct listing. The music-streaming service Spotify debuted on the New York Stock Exchange in April 2018 through the same process and slid in its first day of trading.
The company has already garnered two ratings from Wall Street analysts — one neutral and one bullish. Rishi Jaluria, an equity analyst with the firm D.A. Davidson, said on Thursday he arrived at his neutral rating on the basis that the stock looks too expensive for his taste.
“My neutral rating is strictly valuation-based,” Jaluria said in an interview on CNBC. “My due diligence when talking to Slack customers is really positive.”
He added: “But I look at the valuation right now that Slack’s coming public at, and it’s up there with probably the most expensive names in software, like Okta or MongoDB. I just think I’d want either a more attractive entry point, or I’d want to see evidence that Slack can gain traction in other industries outside of tech or tech-forward companies.”
More than half of Slack’s users are outside the US, Slack CEO Stewart Butterfield told the CNBC anchor Andrew Ross Sorkin in an interview Thursday morning in front of the New York Stock Exchange. Those users outside the US comprise 35% of the company’s revenue.
When Sorkin asked Butterfield what he might count as a successful first day of trading, Butterfield said he wasn’t going to focus on every tick.
“Short term, the markets are a voting machine; long term, they’re are a weighing machine,” he said, invoking the famed investor Benjamin Graham’s adage. “It can take time for people to figure it out and wrap their heads around a business, but I would love to have this job for the next 20 or 25 years, so hopefully the investment community will have me. That’s the time period where we’re looking to establish what we can do.”
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