Realist, not conformist analysis of the latest financial, business and political news

Slack Won’t IPO This Year – It Doesn’t Need The Money

Slack will be coming to public markets this year, so we’re told, but it won’t be in the form of an initial public offering, IPO – because Slack doesn’t need the money. That is, given that Slack doesn’t need to raise new capital from the retail markets there’s no reason for them to incur the costs which would allow them to raise new capital.

So, it looks like Slack will come to market via a direct listing rather than an IPO:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Slack to bypass traditional IPO with direct listing
Workplace messaging app would follow in the footsteps of NYSE-listed Spotify[/perfectpullquote]

On the London market we’d refer to this as an introduction rather than a flotation. The crucial difference is this:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Unlike a conventional IPO, companies that go public through a direct listing do not sell new shares to raise money, which makes the process untenable for many companies seeking public ownership.[/perfectpullquote]

It’s untenable if you need to raise new or more capital through the process. If you don’t then you don’t have to incur the costs which would allow you to. These are substantial:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]Spotify paid its three financial advisers, the same team Slack has lined up, about $35m in fees. By comparison, Snap, the owner of messaging app Snapchat, paid its underwriters about $100m.[/perfectpullquote]

Why spend $65 million if you don’t need to ? Well, quite.

Slack’s to use that direct listing instead of an IPO simply because Slack doesn’t need the money.

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