The shares of Slack, the US enterprise chat software company which went for direct listing of its shares on the New York Stock Exchange instead of an IPO, surged more than 50 percent valuing the company at over $24 billion.
At its last private funding round in August Slack was valued at $7.1 billion. Of the companies that listed on the NYSE this year, only Uber has achieved a higher valuation than Slack at $75 billion. Uber competitor Lyft also listed on the NYSE this year, but was valued at $19.5 billion.
Slack took the direct listing route allowing its shareholders to sell stock without waiting for a lock-in period. Among technology companies, Spotify was the last one to take a similar route. The strong showing of Slack’s shares validated the company’ s method of listing. The listing also showed sustained investor interest in enterprise software companies.
The difference in Slack’s method of listing is that, like Spotify, it did not raise fresh funds. The direct listing method also helps Slack save on investment banking fees.
Direct listings are thought to be more attractive for companies that have raised large amounts of funds for longer periods in the private market and then seek to provide their investors an upside in their exits.
Slack’s trading price on Thursday gave it a valuation that was 50 times revenue. Analysts believe the valuation is very high considering that Slack is not yet profitable.
Slack helps business users interact in chatrooms with the ability to collaborate on documents and arrange conversations according to themes and groups.
Investors continue to be enamoured with enterprise software companies because of their excellent performance. Enterprise software IPOs conducted over the past 12 months are trading at an average of more than 100 percent their IPO price.
Slack had raised $1.4 billion from investors including Andreesen Horowitz. The enterprise software company made losses of $138.9 million last year and expects losses to significantly increase over the next few years. Revenue has risen to the region of $400 million from $100 million three years ago.