Spotify’s direct listing in April 2018 brought a valuation of $25 billion, surpassing the valuation of its last private funding round from a year earlier, which valued it at approximately $19 billion. Slack’s shares soared 50% in its debut on the New York Stock Exchange, giving it a valuation of about $20 billion. But sometimes the jump in share price at the launch can also mask the ultimate valuation as the stock price eventually settles. In a regular IPO, the listing price is calculated at a slight discount to where the stock is expected to trade, to give the subscribed investors a first day profit. Companies which go the direct route can still get cash from the markets, they will just have to wait at least 90 days to begin any type of follow-on offerings, Kline said.ĭon’t miss: Slack listing comes during banner year for tech IPOsĪ direct listing can also be good for a company’s valuation, which is why it may be under consideration by more unicorn companies. One advantage of the direct listing is that executives and employees can immediately sell their shares without a lockup period, and there is far less dilution of a company’s stock, because they are not issuing new shares to raise money. We wanted to avoid the distortion of a traditional IPO in the market.” “We consider a direct listing the proper vehicle for us, and a way for the public market to be more efficient and let it do its job. “We had no need for new capital so we took this route," Slack Chief Financial Officer Allen Shim told MarketWatch in an early interview. In fact, experts on initial public offerings told MarketWatch this week that direct listings like Slack’s will likely work best only when they meet certain criteria: They need to be large companies with well-known brand names and strong balance sheets and no immediate need for more cash. “Both of those companies went public with an eye on raising money to invest in the business, so a direct listing would likely not have been a good option for either of those two in my opinion,” she said. No, said Lise Buyer, principal analyst at the Class V Group. Regretting going public the old-fashioned way, while investment bankers made tens of millions in fees and the ride-hailing companies suffered criticism after what were considered disappointing IPOs? Slack non-IPO: 5 things to know about the direct listing I don’t know anyone who is working on it but i wouldn’t be surprised if people were considering a direct listing.” “This will become a really interesting alternative. “Slack has gone really well,” said Rick Kline, a partner at Goodwin Procter who has been working with Slack, adding that the IPO market is clearly very receptive right now.
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