Like Spotify before it, workplace-messaging company Slack plans to go public through a direct listing, according to the Wall Street Journal. By having a direct listing, Slack shareholders won’t be diluted by the issue of new shares. The company will bypass the fees of underwriters, which often charge as much as 8% of an IPO capital raising to assist in regulatory requirements and ensure realistic stock pricing. A direct listing also allows early shareholders, including employees, to sell shares faster as companies don’t need the usual “lockup” restrictions that accompanies IPOs.
The question is whether Slack can make a direct listing work as well as Spotify. Without the marketing that accompanies efforts to bring in new investors in an IPO, a listing might sink. Direct listings are seen as more suitable for companies like Spotify whose brand name is well known. Does Slack have the same level of name recognition? It’s hard to say, although there is no doubt lots of people now use the chat service at work. Slack was valued at $7.1 billion during a private funding round in August, and is expected to go public during the second quarter of 2019.