A blast in the past with this historical look
Slack IPOed at $38.50 per share on June 20th, 2019. It's one of the more interesting IPOs because it listed as a DPO (more on that later). Since then, its stock price has fluctuated greatly, mainly due to the heavy competition from Microsoft Teams.
Today, it has since been acquired by Salesforce for $37.5 billion and will join the CRM's list of recent acquisitions.
What Is Slack?
There is a very high possibility that you’ve heard of Slack and even used it. You may not know what it actually stands for which is: “Searchable Log of All Conversation and Knowledge”.
Slack began as an internal tool used by the company, Tiny Speck, in the development of Glitch, a now-defunct online game. The founders created Slack because they were frustrated with email. So they reimagined the experience, with a focus on team-based channels rather than email inboxes.
Although the game closed, they knew they had something bigger in their hands with this new collaboration tool.
In case you don’t actually know what they do at all, here’s a great summary from their own website:
Slack is a collaboration hub where you and your team can work together to get things done. From project kickoffs to budget discussions, and to everything in between — Slack has you covered.
To put it simply, imagine an instant messaging service where you can collaborate and share with fellow employees (it’s much more than this though!)
Unlike standard offerings, Slack bypassed the big banks and went for something we call a direct public offering (DPO).
What Is a Direct Public Offering (DPO)?
According to Investopedia: A direct public offering (DPO) is a type of offering in which a company offers its securities directly to the public to raise capital.
With the conventional IPO model, companies use an investment bank (think of your JP Morgans and Goldman Sachs) or their own syndicate to underwrite their offering.
The underwriter will gather interest from banks, institutional investors, mutual funds and then the underwriter will decide the offer price based on the financial data and the amount of interest gathered by the institutions.
By going through a DPO, it removes the middlemen (investment banks, brokers, underwriters, etc.) and instead self underwrites its securities.
As you can see from the above, this eliminates a lot of costs which substantially lowers how much you need to spend to go public.
This is normally a route smaller companies go for but Slack was following Spotify’s footsteps by going this route. It also means the company must have a huge interest already and loyal followers (which it certainly does!)
This also means they are not doing a capital raise.
With about $841 million dollars in the bank, Slack was showing that they were confident and that they did not need any extra cash at this stage.
What were the key financial facts of Slack?
Here were some interesting statistics at the time surrounding Slack’s financial history:
- Revenue of $400.6 million in the fiscal year ending Jan. 31, 2019
- Revenue up by 82% from prior fiscal year
- Lost $140.7 million in its latest fiscal year, versus $140.1 million in the prior year
- Cash burn rate in the latest fiscal year was $97 million
- Cash, cash equivalents, and marketable securities: $841.1 million
- Daily active users exceed 10 million with 88,000 of them paid customers
- Used by over 600,000 organizations with three or more employees
Although Slack was making and growing its revenue, it was still losing money. One of the most important things to note was that Slack has a huge free userbase which they were confident in converting into paying customers in the future.
Although today it still struggles against Microsoft, with its partnership with Salesforce, it will mobilize a much stronger sales team to hopefully compete with Teams.
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