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Slack files to go public via direct listing

·West Coast Correspondent
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Slack is going public. The workplace messaging company confidentially filed an S-1, a form companies file in anticipation of an initial public offering, with the Securities and Exchange Commission on Monday.

Last month, The Wall Street Journal reported that the company plans to take the unconventional route of a direct listing.

The direct listing process circumvents the costly fees for underwriters and instead sells shares directly to the public, and there is no lock-up period. They’re rare because no money is raised for the company beforehand.

The Slack app is displayed on a mobile phone, Tuesday, Jan. 31, 2017, in New York. Slack Technologies is hoping to convert more big businesses to its online business messaging service by making it easier for workers in different departments to communicate with each other. The new option, called "Enterprise Grid," represents another major step in Slack's attempt to get more workers and employers to lessen their dependence on conventional email and embrace its service instead. (AP Photo/Mark Lennihan)
Slack filed to go public on February 4.

Smaller-sized startups, particularly in the tech and biotech sectors, have filed direct listings in the past. But Spotify (SPOT) made a splash as the first large company to go public on the New York Stock Exchange via direct listing. Shares of Spotify are down about 8% since the company went public in April 2018.

Slack raked in $221 million in revenue for 2017 and had $900 million in cash on its balance sheet as of October 2018, according to documents reviewed by The Information. The company was last valued at $7.1 billion.

‘Microsoft is a serious competitor’

Slack board member Sarah Friar, who would not speak about a potential exit for the company, detailed her thoughts on the IPO process in an interview with Yahoo Finance last week.

"It's a milestone and it definitely speaks to the maturity of a company or what you’ve built, but if you get your employees all kind of [thinking] ‘this is the goal’ what happens on the other side of that mountain that they’ve climbed? And so that was a very good learning at Square because we did not have a very successful IPO. It was so hard."

As of December 2018, Slack had over 8 million daily active users, which the company’s co-founder and chief technology officer Cal Henderson said is the leading metric.

“We're really just focused on continuing to grow the business and staying independent. And we're really focused on that kind of usage growth as a measure of growing the business. So the main stat that we look at is daily active users,” he told Yahoo Finance in December.

The primary formidable competitor to Slack is Microsoft (MSFT) teams, but Henderson said it was a healthy sign.

“Microsoft is a serious competitor to anybody they're competing with I think. But I think that that's been good for us. When you start a product startup, you have to have an irrational belief that it's definitely going to succeed, and it's a thing that everybody wants, and it's inevitable,” he told Yahoo Finance.

“It’s very validating to have such a serious competitor as Microsoft validate that too, that this really is a product category that everybody is going to be using over the next few years.”

Slack did not immediately respond to requests for comment.