Slack, the San Francisco-based company behind the workplace-messaging service that has seemingly taken over how employees communicate with each other, went public Thursday in a way rarely seen on Wall Street.
Instead of the traditional initial public offering, which involves a company selling some shares to underwriters and insiders who then offer their stock for sale to the public, Slack entered the public markets public via a "direct listing" _ which means the company simply put its shares out on the New York Stock Exchange where anyone could then buy them.
And instead of underwriters setting an opening price for Slack's stock, the NYSE has come up with a "reference price" of $26 per share. This price was determined by estimates of where Slack's shares traded privately in recent months and served as a starting point for brokers to begin taking buy and sell orders on the stock Thursday.
Initial reaction to Slack going public was strong as the company's shares opened at $38.50 and quickly surged 7.7% to $41.47. Slack was expected to make 283 million out of approximately 599 million of its shares outstanding available for trading.
Alejandro Ortiz, principal analyst at SharesPost, a secondary market for shares of private tech companies, said that in going public now, Slack could benefit from recent high levels of interest in the public debuts of so-called software-as-a-service companies (SaaS) such as Zoom Video Communications, of San Jose.
Zoom, which uses cloud-based technology for video conferencing, went public in April at $36 a share, and was trading at $106 a share Thursday.
But Ortiz said that the direct listing approach taken by Slack could come with some pitfalls.
"The absence of a potentially notable (stock price) pop, as seen with traditional IPOs, may hamper Slack's retail demand," Ortiz said. "Another concern with a direct listing is insufficient demand for the company's shares once it begins trading."
