NEW YORK, June 20 (Reuters) - Slack Technologies, the fast-growing workplace messaging and communication platform, is poised for an unusual public listing on Thursday that will see it trade on the New York Stock Exchange and could value it at around $16 billion, according to a person familiar with the matter.
The so-called direct listing, which differs from a traditional IPO in that it does not raise fresh funds, will put on trial a method pioneered last year by music streaming business Spotify Technology.
“We think the jury is out on whether this is the right move or not,” said Kathleen Smith, a principal and manager of IPO ETFs at Renaissance Capital. “Looking at Spotify, it takes a little time for the stock to get established after a direct listing.”
Slack’s debut follows a spate of much anticipated technology IPOs, some of which, including Uber Technologies Inc and Lyft Inc, had disappointing starts to trading.
The direct listing model offers Slack an opportunity to save significantly on investment banking fees and avoids agreements that would otherwise prevent many current shareholders from selling their stock.
Slack’s direct listing could have implications for other large technology companies such as Airbnb, which is considering going public through a similar approach, a person familiar with the matter said.
The New York Stock Exchange on Wednesday set a reference price of $26 per share, indicating a value of around $16 billion. The reference price is not a trading price but is used in the process of building a book of orders.
For its listing, Slack expects to pay $22.1 million in fees to its financial advisers. By comparison, banks earned $85 million in commissions from the 2017 IPO of Snap Inc, which was worth about $31 billion at the time of its public listing.
Spotify’s direct listing in April 2018 was perceived as a success at the time, with a healthy number of buyers and sellers.
More than a year after going public, Spotify’s stock is trading around 15% percent below where it debuted as the music-streaming company sacrifices profit margins to generate growth.
“Direct listings are still a pretty new vehicle. It’s really interesting to see how that evolves,” Fiverr Chief Executive Micha Kaufman said in an interview last week after the Israel-based company went public.
“But it’s definitely more appropriate for companies that have raised larger sums for longer periods of time in the private market, and are really wanting to give their investors an upside or an exit.”
San Francisco-based Slack reported revenue rose more than 80 percent to $400 million in 2018, when its losses from operations were $143.85 million. It has more than 90 million users but so far has only around 100,000 paid customers.
Slack had around $295 million in total cash or cash-like assets at the end of April and has raised around $1.2 billion so far from private investors, according to data provider PitchBook and the company’s regulatory filing.
($1 = 0.8921 euros)
Reporting by Joshua Franklin and Carl O'Donnell in New York; Editing by Cynthia Osterman