The Slack Public Offering: What You Need to Know

Slack, the popular workplace messaging app, is one of the latest fast-growing tech companies with plans to go public. The company filed paperwork to the Securities and Exchange Commission on April 26, working toward trading on the New York Stock Exchange.

“This marks Slack’s completion from much-loved messaging app into one of the dominant players in the team collaboration market,” said Tom Hadfield, CEO of M.io, a universal messaging network that allows users on different chat apps to talk to each other.

Slack has grown enormously since its 2013 launch. The service started as an internal instant messaging system meant to cut down on email. Now, the company might be valued at as much as $15 billion. Slack ended the fiscal year Jan. 31 with revenues of $400.6 million, up 82% from the previous year and its paying customers grew 50% year-to-year. But Slack is still reporting losses — $140.1 million in 2018.

Unlike some companies that go public to raise cash, Slack doesn’t need the money. It has $841 million on the books. With that in mind, Slack isn’t going the traditional IPO route, but is planning on a direct public offering (DPO). A DPO is faster and less expensive because it doesn’t use an investment bank to underwrite the stock offering.

One of the risks of a DPO is that the share price can be more volatile. However, like streaming service Spotify, which recently went through a successful DPO, Slack is using Morgan Stanley as an advisor.

How exactly Slack’s public offering will fare is unknown, but tech businesses that sell software to other business are often popular with investors. The workplace messaging business will also continue growing, Hadfield said. Though that doesn’t mean Slack will end up completely dominating the industry.

“We’re only in the second inning of the enterprise messaging wars,” Hadfield said. In the next two to three years, Hadfield estimates that more than 100 million users will move from older, instant messaging apps like Skype for Business and Jabber to more modern apps like Slack, Microsoft Teams and Cisco’s Webex Teams.

Going public will also open Slack up to a broader group of industries. So the company will likely need to shore up privacy and security to meet those industry’s needs, said Nicholas Sonnenberg, co-founder and CEO of virtual assistant marketplace, Leverage.

“Security will be a big priority,” he said. “If you’re in the medical field, Slack isn’t HIPAA compliant unless you’re on the Grid.”

The Grid is Slack’s Enterprise Grid product, meant for larger, more complex businesses. It meets HIPAA standards for use in messaging and files, but not with all of its features.

Regardless, competition will remain and so Slack will need to continue innovating and doing what it does best — streamlining internal communication and making workflows more efficient.

“The religious-like devotion of Slack users, especially tech savvy users like engineers, is almost unparallelled in enterprise software,” Hadfield said. “But despite its popularity, Slack is not in a winner-takes-all market. Microsoft, Cisco and Google will always have a significant share of the market, too.”

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