Slack, the workplace communication tool popular in tech and media circles, began trading on the New York Stock Exchange on Thursday, making it the latest tech unicorn to race to Wall Street this year. But Slack took a more unconventional approach to going public.
The company chose to list its existing shares directly on the stock exchange rather than raising money by issuing new shares to be sold to public investors. Spotify, another tech company, took the same approach when it went public last year.
Slack opened at $38.50 a share on Thursday, and ended the day slightly higher at $38.62 a share, a nearly 50% increase from its $26 reference price — not to be confused with an IPO price — set on the eve of its market debut. At its closing price, Slack had a market value of roughly $23 billion.
“There was definitely quite a lot of debate for awhile because it isn’t the traditional route,” Cal Henderson, Slack’s cofounder and CTO, told CNN Business in an interview on Thursday about the decision to do a direct listing. “But we didn’t have a need to raise capital. That was the biggest driver.”
Slack raised more than $1 billion in venture funding from prominent investors including SoftBank, Accel and Andreessen Horowitz.
The unusual route to going public is fitting for a company with an unusual backstory.
In 2009, after selling his photo sharing site Flickr to Yahoo and later leaving with a resignation letter for the ages, Stewart Butterfield teased plans to launch a new company called Tiny Speck. “Maybe I make a terrible boss,” he wrote in a tweet in 2009, “but at least I know it.”
Two years later, Tiny Speck launched Glitch, a multiplayer online game described by one outlet as “zany”and “unusual.” It didn’t last long. In 2012, the company announced it would shut down the game after failing to attract a big enough audience. “We definitely had grand ambitions that didn’t turn out,” Henderson recalled of that period.
But there was a silver lining: Tiny Speck said it had developed “some unique messaging technology with applications outside of gaming” and planned to continue working on it. That product became Slack, a collaboration tool that lets coworkers send files, GIFs and party parrot emojis to each other.
Slack had more than 10 million people using it daily in the first three months of 2019, on free and paid versions, according to its filing to go public. It is a fixture for teams at companies like IBM, Lyft and, disclosure, CNN.
Like many of its tech peers, Slack’s revenue is growing fast, but the company remains unprofitable. Slack posted revenue of $134.8 million for the three months ending April 30, a 67% jump from the same period in the year prior. It lost $31.9 million for the quarter, up from $24.9 million in the same period a year earlier.
While two of the most high-profile tech IPOs of the year, Uber and Lyft, have so far been a bust, a number of other newly public tech companies are doing well, particularly those targeting the enterprise market as Slack does.
Zoom, a video conferencing service, is now trading at nearly triple its IPO price and PagerDuty, a digital operations management platform, has more than doubled from its IPO price.
“We’re an enterprise software company, which is a very straightforward business model. People understand how to model that out. It’s easy to predict,” Henderson said. “We definitely have that in contrast to some of the other IPOs this year.”