Slack’s Non-IPO Went Pretty Well

I don’t want to say that if Slack Technologies Inc. had gone public through a traditional initial public offering, it would have done so at a $26 IPO price, because I don’t think that’s particularly true. Slack went public through a direct listing yesterday, and on Wednesday evening a “reference price” of $26 was announced, but that reference price was just sort of a weird curiosity of New York Stock Exchange procedure. It was informed by views from Slack’s bankers, by the recent trading of Slack’s stock in private markets, and perhaps by some sense of the supply and demand for Slack’s stock once it went public. But it certainly wasn’t as well informed as an actual IPO price would be: Slack’s bankers didn’t get firm orders to sell a fixed number of shares, go out and market those shares, get firm orders to buy those shares at a fixed price, and then price the deal at that price. They just sort of eyeballed a price. That price might have been their best guess at what an IPO price would have been, but you don’t have to interpret it that way, and in any case it was a guess with no money on the line: No shares were sold at $26, so the consequences of getting it wrong were minimal.

Slack’s actual opening price, when it started trading a little after noon yesterday, was $38.50. That’s the price that was set in the opening auction at the New York Stock Exchange, in which Slack’s pre-IPO shareholders put in orders to sell their stock and potential public investors put in orders to buy. A lot of shares were sold at that price. Some 45.5 million shares crossed in the opening auction, according to Bloomberg data, and since Slack was not public the second before that auction, you can reasonably assume that every one of those shares was sold by a pre-IPO private holder of Slack. In a crude sense, that was Slack’s “IPO,” the big coordinated transaction in which a bunch of its private shareholders first sold their shares to the public at a fixed price. It was for 45.5 million shares at $38.50, or about $1.8 billion, a healthy size for an IPO. It represents about 9% of the company’s stock and would be the fourth-biggest U.S. IPO of 2019 so far, if it had been an IPO.