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Slack sets $26 direct listing reference price for NYSE IPO

The workplace messaging company is set to go public, but with a slight twist, with the firm opting for a direct listing instead of a traditional IPO and setting a reference price of $26 a share.

Slack Technologies is scheduled to go public on Thursday, with the workplace messaging application listing on the New York Stock Exchange, except its approach to market is a little different to a typical initial public offering (IPO).

Unlike many of its tech peers, Slack is opting to enter the public market via a direct listing, which allows a company to list without the need of underwriters.

Slack opts for direct listing alternative to traditional IPO

Going public via a direct listing will see Slack’s share simply begin trading on the NYSE unlike an IPO that sees the company go through a book building stage whereby intermediaries and investors buy share ahead of the listing.

Direct listing is looked at by investors as inherently riskier than a traditional IPO as there is no intial price at which the share is sold at and, therefore, it is unclear where the stock will open trading.

Slack will become only the second major company to go public via a direct listing, with the first being Spotify, which initially had a bumpy start to public life back in April last year.

Spotify’s direct listing saw its share price swing wildly, with it rallying more than 30% in its first month of trading, before plummeting more than 40% before the end of 2018, with the stock currently trading at around the same levels where it initially opened.

NYSE sets $26 reference price in direct listing

Unlike an IPO, a direct listing sees the stock exchange set a reference price for the stock, with the NYSE setting Slack’s at $26 a share.

At that price the company is valued at around $15.6 billion.

NYSE landed at this price based on where private trades had occurred over the last few months, with its stock trading privately within a range of $25.75 to $31.50.

Despite this method of going public being relatively untested, the IPO environment is very favourable for companies like Slack, with investors looking to snap up shares of newly listed tech businesses regardless of their fundamentals.

Recent IPO successes include Beyond Meat and Pinterest, which have seen their share prices rally by as much as 580% and 52% above their initial price.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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