Team collaboration software developer Slack reportedly plans on going public through a direct listing, rather than filing a traditional initial public offering (IPO), according to sources who spoke with the Wall Street Journal.
If the WSJ’s sources are correct, it would make the U.S.-company the second large tech company — including Sweden-based audio streaming giant Spotify — to avoid a traditional IPO.
A company typically uses a direct listing — also known as direct public offering (DPO) — to raise capital investment directly, without an outside firm underwriting — accepting liability — for a company.
According to Investopedia, a company that uses a DPO “eliminates the middlemen — investment bankers, broker-dealers, and underwriters — that are typical in initial public offerings.”
As a result, a DPO forces a company to seek out investment capital on its own, but a company that chooses this route typically has access to more broad avenues of capital investment and has more control over how it chooses to spend the capital it acquires.
Spotify quietly filed documents to go public in January 2018, and according to the Wall Street Journal, the company’s listing was “widely viewed as a success.”
Source: Wall Street Journal