Going Public without an IPO

We are only halfway through the year and 2019 promises to be one of the busiest years for companies who have made the transition from private to public. Uber, Fastly, Pinterest, Zoom and Lyft, just to name a few, are some of the bigger names that are now public as of this year. On June 20″, Slack made its much anticipated debut on the New York Stock Exchange but they did it a bit differently. They went public without doing an IPO, which sounds like an oxymoron to most people, and also leads to the questions as to how, why and was it a success?

Instead of filing an IPO, Slack directly listed its shares on the NYSE. There were a few reasons they did it this way. First of all, an additional round of funding would dilute the shares of existing shareholders by about 10% and Slack didn’t need money. Second, by directly listing on the NYSE and not filing an IPO, Slack employees can bypass the lockup period, typically 6 months, which prohibits large shareholders from selling their shares. Slack felt that this was psychologically important to their employees to not be forced to hold on to those shares for what would feel like an eternity, and potentially have a negative impact on morale.

Investors and private companies considering a similar path to the public markets will be closely watching the reception to Slack’s debut. Slack was trying to also avoid the first day volatility, which is often seen on a company’s first day of trading, and they got their wish as shares closed 48% above the price that had been projected. Spotify was the last high profile stock to not file and IPO and go public in the last year. Their stock is up 13% from it’s debut.

It should be interesting to see if other companies follow suit to the successes of Slack and Spotify. Nevertheless, it should be exciting to see what happens in the second half of 2019 for IPOs, a period which promises to be just as exciting as the first half. We shall see.

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