has fared far better than expectations. However, all of those companies took a different path than Slack by going the usual IPO route.
In its entrance on the New York Stock Exchange, Slack became only the second large company, after music streaming giant Spotify, to carry out a direct listing instead of an IPO. A direct listing means that Slack isn’t issuing any new shares. Instead, current shareholders may trade their shares publicly. This method allows the company to save money by bypassing Wall Street underwriters. But, with no new shares, Slack isn’t raising any funds.
Another caveat of using a direct listing is that Slack stockholders, including employees, are not blocked by lockups as they would normally be in an IPO. Typically, existing shareholders would have to wait 180 days before they can sell their stocks, but Slack’s direct listing involves no such restrictions. Looking forward, the company likely won’t see the post-lockup volatility of a normal IPO, said John Mullins, a London Business School associate professor.
“On day 181 [for an IPO], all those insiders want to start selling to turn that investment into liquidity,” Mullins said. “So at the time that the lock-up expires on a traditional IPO, there's a lot of selling pressure, and typically at that point the stock goes down unless there's something to offset that, like major growth or major new deals. Here, we don't have that risk.”to spurn IPOs as they contemplate the transition into the stock market.
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