Shares of Slack Technologies, the fast-growing workplace messaging and communication platform, soared nearly 50 per cent in their public trading debut on Thursday, valuing the company at more than $23 billion.
The strong performance helped validate the unusual "direct listing" model the company used to go public as well as underscoring investor demand for business software makers.
Slack's direct listing differs from a traditional Initial Public Offering because it does not raise fresh funds. The method was pioneered last year by music streaming business Spotify.
IPO and direct listings are two methods for a company to raise capital by listing shares on a public exchange. While many companies choose to do an IPO - in which new shares are created and sold to the public - some companies choose a direct listing, in which no new shares are created and only existing, outstanding shares are sold with no underwriters involved.
Slack is a business-focused messaging and communications platform, similar to group chatrooms. The Slack tool began as an internal project to improve communications at video game company Tiny Speck, which eventually became Slack Technologies and focused on developing the communications software.
Slack's listing opened with about 40 million shares trading to outside investors, providing better-than-expected liquidity for the stock, a person familiar with the matter said.
The debut follows a spate of high-profile technology IPOs, some of which, including Uber and Lyft, had disappointing starts to trading.
The direct listing model offers Slack an opportunity to save significantly on investment banking fees.
"We think a direct listing is a more effective and efficient way to get to a normalised level of supply and demand without the constraints of an IPO,” said Allen Shim, Slack's chief financial officer.
Slack's direct listing could have implications for other large technology companies such as Airbnb, which is considering going public through a similar approach, one person familiar with the matter said.
Revenues for San Francisco-based Slack soared more than 80 per cent to $400 million in 2018, but it reported losses from operations of $143.85m. It has more than 90 million users but so far has only around 100,000 paid customers.
"We are in a growth phase right now and we are continuing to invest, but we expect to hit breakeven cash flow soon," Mr Shim said.
