Silicon Valley’s zeitgeist of ‘innovation’ and ‘disruption’ has a new public offering ambassador and it’s San Francisco-based Slack (NYSE: WORK). On June 20, the company joined the ranks of multi-billion dollar ‘tech unicorns’ like Uber (NYSE: UBER) and AirBNB who have made 2019 their year for going to market.
Unlike the majority of their sister-tech companies, Slack decided to direct list and started trading on the NYSE on Thursday. Stocks soared well above the $26 guide price and closed $38.62 that same day valuing the company at close to $24 billion. Slack is a work messaging platform that was designed to disrupt traditional email communication and has gained favor with businesses big and small.
Slack is the second tech company to opt for direct list – Spotify (NYSE: SPOT) was the first – over the more conventional and costlier IPO option. A typical initial public offering process, underwriters will line-up several investors keen to buy to help stabilize stock prices for a period after its introduced on the market.
“In a normal IPO, you’re more worried about buyers than sellers showing up,” said Joe Mecane, head of Citadel Securities and Slack’s ‘market maker’. But when a company chooses to proceed as a direct listing, the selling shareholders “will often just wait because they want to see what is going to happen. In which case, you can end up in a situation where you have buyers showing up, but you’re not quite sure whether or not the supply is in the market.”
While investors have been eyeballing the trade stalemate between China and the US with some concern, John Tuttle, Chief Commercial Officer at the NYSE, believes that “market conditions matter a little bit less than in a traditional IPO.” Slack’s shares had declined 3.63 percent to $37.22 USD at close of market Friday but it’s early days. While the company is off to a strong start, much remains to be seen.
Other opportunities for the tech-saavy investor comes from the image-driven social platform Pinterest (NYSE: PINS) which debuted on the NYSE April 18 and closed Friday at $27.98 USD – up approximately 17 percent over its $19 IPO. Wedbush’s Ygal Arounian is betting that it could be a ‘winner in social commerce’ after bestowing the blessing of an outperform rating and a $33 12-month price target. While Pinterest’s outlook for the 2020 fiscal year points to 41 percent increase year-over-year, the company’s upper-limit valuation can make it an expensive buy for investors looking to make a significant return on investment.
Teleconferencing software company Zoom (NASDAQ: ZM) also made their IPO introduction on April 18 and was offered at $36, started trading at $65 on NASDAQ and was worth $101.47 at close of day Friday. It’s up roughly 54 percent since their April start and are one of the few tech companies fresh off their IPO that are currently turning a profit. The company released their fiscal first quarter earnings on June 6 and their revenue increased 103 percent year-over-year to $122 million.
Sources:
https://money.usnews.com/investing/stock-market-news/slideshows/best-stocks-ipo-this-year?slide=6
https://www.theguardian.com/technology/2019/jun/20/slack-ipo-stocks-app-public-latest-share-prices-beat-expectations
https://www.vox.com/recode/2019/6/20/18650993/tech-ipo-tracker-uber-lyft-slack-zoom http://fortune.com/2019/06/19/slack-ipo-stock-price-direct-listing/
https://www.benzinga.com/analyst-ratings/analyst-color/19/06/13937654/why-pinterest-is-different-than-traditional-social-media-platforms
http://fortune.com/2019/06/19/slack-ipo-stock-price-direct-listing/
https://www.thestreet.com/investing/pinterest-stock-is-best-avoided-14995883
https://www.fool.com/investing/2019/06/10/why-zoom-video-stock-jumped-monday.aspx
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
