Spotify introduced us last year to the direct listing model, at least as it relates to mega VC-backed companies, and how Slack has prepped for its unique debut is one of the 10 things you need to know from the past week:
1. Don't call it an IPOIn theory, Slack's direct listing should be somewhat of a mystery—it's still a fairly unproven IPO alternative, after all.
If there's no roadshow, no lock-up period and no initial pricing, any widely differing views among buyers and sellers could send the stock price all over the place.
In reality, there are a few reasons to think we won't see the volatility often cited as a caveat to this type of exit. Bloomberg reported last week that Slack's public debut will likely value the company at around $16 billion to $17 billion. That's notable because it falls in line with how the company's shares have traded recently in secondary deals. And the continued growth and sophistication of the secondary market means there aren't as many secrets when private companies reach this late a stage.
We also got a fairly good look at Slack's updated financials last week, where we can clearly see a slowdown in revenue growth but also shrinking operating losses. As covered in our analyst note looking ahead to Slack's debut, an EV/revenue multiple range of 22x to 27x seems to be in line with what we've seen from other enterprise-focused SaaS companies like Zoom or PagerDuty—each of which has seen its stock price soar the past two months.
Pop or not, Slack's investors will be sure to cheer Thursday's milestone. The company was valued at $7.1 billion in its last private round, a $427 million Series H in August 2018, meaning a healthy profit is in store for four key investors—Accel (23.8% stake), Andreessen Horowitz (13.2%), Social Capital (10.1%) and SoftBank (7.3%).
The big losers? It could be bankers missing out on future IPO fees. Airbnb is another VC-backed giant rumored to be among those that might eschew a traditional offering, and others could follow if the lower-cost method continues to have proven success.
Direct listings won't be for everyone, especially those in need of cash. And outside of Uber and Lyft, tech IPOs have sizzled of late. But all it takes is a few to start a trend.