Slack’s planned public listing later this month will be the next big test of Wall Street’s demand for tech stocks. Recent IPOs, of Uber and Lyft in particular, have disappointed. But Slack has the advantage of being in a sector—subscription software—that is a hot favorite with investors right now.
The question is whether that will last. Subscription software stocks, ranging from Atlassian to recently public Zoom, have reached dizzying highs in recent weeks. Overall their median valuation hit 9.1 times trailing revenue in late May, up from 6.7 in December, according to data published by Blossom Street Ventures. And Slack is well ahead of that. In secondary market trading, it has lately been valued at about $19 billion—more than 40 times revenue of $454 million in the year ended April 30.