Slack's newly public shares aren't slacking off.
The work messaging service's market value grew 60% after it started trading Thursday under the ticker "WORK."
Slack's debut is the latest in several highly anticipated initial public offerings of stock for tech companies. While some such as Uber hit a few potholes on their opening day, companies focused on business services appear to be doing well.
Slack's shares debuted on the New York Stock Exchange at $38.50 and rose $3.23, or 8.4%, to $41.73 in afternoon trading. That's 60% above the $26 reference price set by the exchange based on an analysis of recent trading activity among a more limited number of investors in the private market.
Slack's IPO is using an unusual approach known as a direct listing. In such cases, a company doesn't hire underwriters or sell new shares to raise money; it simply lists existing shares.
Slack launched publicly in 2014 and was quickly adopted by many workplaces, particularly in tech and media.
Slack aims to replace traditional work communication such as email and instant messaging. With Slack, users start "channels," or a group chat with a specific topic. New employees can see what's already been discussed and shared rather than join a conversation mid-stream. And unlike internal corporate messaging systems, Slack makes it easier for teams in different companies to collaborate on the same platform.
Creative Strategies president Tim Bajarin said his firm started using Slack about five years ago.
"We could have used standard messaging systems, but they're not designed for collaboration and the kind of workflow that a lot of companies use them for," he said.
But with anything people spend several hours a day on, there have complaints by some, who say it can be confusing to navigate between channels and doesn't actually save much time.
"Any piece of software like this is an evolutionary product, and the more feedback they get they'll just add more features," Bajarin said.
Slack says 600,000 organizations in more than 150 countries use the service _ the bulk on a free service, which imposes limits such as how far back an employee can view archives. The San Francisco company says its more than 10 million daily active users collectively spend more than 50 million hours on Slack in a typical week.
Slack said in a regulatory filing that the volume-weighted average price of shares that changed hands in the private market from February through May was $26.38. That was partly how the New York Stock Exchange came up with the $26 base price.
Kathleen Smith, principal at Renaissance Capital, which researches IPOs, said a direct listing saves the company underwriting fees, but it means the company needs a strong investor relations program since initial shares aren't being sold at a discount to attract buyers.
"It's always a little challenging to get this kind of value into the market elegantly. We know it was challenging for Uber," she said. "These very large IPOs can have a rocky road when they enter the market."
Slack's listing is the latest in several highly anticipated tech IPOs. Rideshare companies Uber and Lyft, video conferencing company Zoom Video Communications and digital scrapbooking site Pinterest have all gone public in recent weeks. They haven't all been successes. Uber's IPO in May was the most highly anticipated debut, but fell 8% on opening day.
Slack said earlier in June that for the February-April quarter, the company lost 26 cents per share as revenue jumped 67% to $134.8 million.
For the fiscal year ending in Jan. 31, 2020, it expects revenue to grow 47% to 50% compared with the previous year, totaling $590 million to $600 million.
Slack is the second major tech company to start trading with a direct listing; Spotify did so in April 2018. More than a year later, Spotify's shares are trading at $147, about the same price it debuted at.