- Slack is planning to direct list its shares on the New York Stock Exchange in the next few months, The Wall Street Journal says, citing sources.
- Last year, Spotify became the first big technology company to direct list its shares.
- Companies avoid paying fees by direct listing shares, but there are some risks.
The workplace-messaging platform Slack is planning to direct list its shares on the New York Stock Exchange in June or July, according to The Wall Street Journal, citing sources.
Doing so would make Slack the second big technology company after Spotfiy to bypass a traditional initial public offering.
A direct listing differs from a traditional IPO in that it cuts out the usual underwriting process that involves lining up investors ahead of time and lets the open market play a larger role in setting the share price.
This will allow Slack to avoid paying the hefty fees that are involved in the process, and also can give shares more liquidity by avoiding the lock-up periods associated with going public through a traditional IPO.
“When we think about why companies go public, they do it for liquidity, to raise their profile, for capital,” John Tuttle, head of global listings at NYSE, told Business Insider in February 2018. “But for those companies that are well-capitalised, all they really need is liquidity.”
Still, there are some risks involved with a direct listing. While Slack has name recognition and a private-market valuation of about $US7 billion, there is still the chance that demand could be weak without a banking contingency doing the marketing behind the scenes. The process also doesn’t involve underwriters generating interest among investors.
This story is developing. Check back for updates…
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