Slack shares soar 50% on Wall Street debut, valuing messaging app at $25bn

Loss-making tech firm smashes expectations in blockbuster first day of trading on New York Stock Exchange

Slack provides messaging and collaboration tools to more than 600,000 organisations (EPA)

Shares in workplace messaging app Slack soared more than 50 per cent in a blockbuster debut on the New York Stock Exchange on Thursday.

The loss-making tech firm smashed a reference price of $26 per share set by the NYSE, surging to $41.73 by mid-morning before ending the day at $38.62.

A much better-than-expected opening meant Slack was valued at more than $23bn, well in excess of the $16bn that had been forecast and making it one of the most successful floats on Wall Street this year.

Slack followed in the footsteps of Uber, Lyft and a raft of other as-yet-unprofitable tech firms that have all sold shares publicly for the first time this year with mixed success.

Like Swedish music streaming service Spotify, Slack opted for a so-called direct listing on the stock market, an unusual route that cuts out the big investment banks which normally underwrite initial public offerings (IPOs) and set the price of a company’s shares.

In a direct listing the company’s designated market maker - a firm that oversees trading in the shares - works to determine the stock’s opening price by examining the buy and sell orders.

Once the buy and sell orders are roughly in balance at a certain price, the stock begins to trade, marked by the ringing of the NYSE’s first trade bell.

Slack’s phenomenal start will be seen as a vindication of its decision to go for a direct listing, which had attracted some debate.

“We think the jury is out on whether this is the right move or not,” said Kathleen Smith, a listing expert at Renaissance Capital.

“Looking at Spotify, it takes a little time for the stock to get established after a direct listing.”

Slack provides messaging and collaboration tools to more than 600,000 organisations and boasts 10 million daily active users.

Its aim is to replace email as the central office communication tool but it faces renewed competition in that field from Microsoft which offers its Teams software for the same purpose.

Tilak Doddapaneni, executive VP at consultancy Publicis Sapient, said Slack had not yet lived up to its ambition.

“With Microsoft moving into its field with the introduction of Microsoft Teams last year, Slack may soon find that they lack the infrastructure and expertise to keep up with the innovation and scale of the tech giant,” Mr Doddapaneni said.

Although Slack has made losses in each year since its foundation, it also has close to 100,000 customers who regularly pay a subscription, unlike companies such as Uber which rely on potentially more volatile revenues from millions of occasional users.

Slack reported an operating loss of $33.8m in its first quarter and expects its adjusted operating loss for 2020 to come in between $182m and $192m.

But Slack also has hundreds of millions of dollars in the bank, meaning it does not need to raise further cash at this stage to fuel its expansion.

Slack expects revenue growth to almost double in 2020 to between $590m and $600m.