On Monday, Slack confirmed what had been rumored for weeks: It's planning on going public soon. The company took the unusual step of announcing, via press release, that it had filed confidential S-1 paperwork with the Securities and Exchange Commission.
Normally, a company keeps its confidential S-1 filing under wraps until 15 days before its road show, when companies are required to make it public. The confidential S-1, which includes a rundown of a company's financial performance and its plans for growth, allows a company to work with the SEC without public scrutiny.
In Slack's case, this press release is the strongest indication yet that other rumors around its plans are also true: that Slack will go public via a direct listing and skip the traditional banker-led initial public offering.
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About two weeks ago, when IPOs were stalled during the partial US government shutdown, Bloomberg's Matt Levine first reported on Slack's plans to do a direct listing.
And the direct listing is most likely still the plan, a source familiar with Slack's thinking told Business Insider, even though Slack is working with a cadre of bankers on the IPO, including Goldman Sachs, Morgan Stanley, and Allen & Co., as Bloomberg's Olivia Zaleski reports.
A direct listing doesn't have bankers as intermediaries buying and selling an initial batch of shares, so the company doesn't pay the banks big commission fees for that service.
Slack can instead sell directly to public investors right away. It may not even need to impose a lock-up period — meaning the company's current investors and owners can sell their shares right away too.
Slack has a ton of investors, ranging from classic Silicon Valley venture capitalists like Andreessen Horowitz to the mega-investor SoftBank Vision Fund. It's raised $1.22 billion as a private company and along the way taken on institutional investors as investors, too, such as T. Rowe Price. That means Slack doesn't need a banker to provide introductions for its road-show presentation — the world of finance is already very familiar with it.
With its latest round of private financing, it earned a $7 billion valuation by selling shares at just under $12. That won't be a hard share price to best on its first day of public trading, either, even with a direct listing, where share prices can be more volatile.
Should Slack use the direct-listing method, other Silicon Valley unicorns with big name recognition and healthy balance sheets will almost certainly take notice. Spotify pioneered the idea of a large, tech direct listing last year. Should Slack have success, no doubt others will follow.
