Slack Is Going Public Without an IPO – How a Direct Listing Works

But in contrast to the vast majority of tech companies that go public using an initial public offering, or IPO, Slack will use a direct offering. Direct offerings can involve more risk—although that risk is lessened if a company doesn’t need to raise more cash, is a household name known to retail investors, and has a group of employees and investors clamoring to sell their shares in the stock market. “The success of Spotify’s direct listing was due in part to Spotify being a well-capitalized company with no immediate need to raise additional capital, while also having a large and diverse shareholder base that could provide sufficient supply-side liquidity on the first day of trading, as well as a well-recognized brand name and an easily understood business model,” Latham & Watkins, a law firm that worked with Spotify on its offering, wrote in a subsequent case study.

Source: fortune.com