Slack files for IPO: Everything you need to know

Collaboration tool Slack has confidentially filed to float on the New York Stock Exchange.

The messaging app will join the stock market under the ticker symbol SK this summer, in either May or June, according to its filing.

Slack, which was last valued at over $7bn (£5.4bn), is credited with revolutionising workplace communication with its collaborative tool, which aims to kill off internal office email.

It is the latest in a rush of tech IPOs happening this summer, following Tesla revealing earlier today that it will aim to hit a $90bn valuation when it debuts.

Pinterest also filed for a $12.7bn IPO last week, while Uber rival Lyft has performed poorly since its own float, dropping 22 per cent from its initial valuation of $72 per share.

Here's what you need to know:

Slack is growing fast - but it’s burning through cash

Slack doubled its revenue in 2018 and 2019 - from $105.2m in 2017 to $220.5m the following year, which then grew 82 per cent to $400.6m in its latest financial year.

But like many other tech companies, Slack is spending money to make money.

It suffered a loss of $146.9m in 2017, marginally decreasing that to a $138.9m loss in 2019 as sales pick up pace.

Still, sales and marketing swallowed 58.2 per cent of 2019 revenue, Slack’s finances reveal.

Shareholders would currently make a loss per share

All of that investment to scale up would weigh on shares, Slack’s balance sheet suggests. Common stock shareholders would have lost $1.16 per share in its latest year.

In fact, Slack warned it may never turn a profit as it chases ever-greater growth.

“We plan to continue to invest in adding organizations to Slack in order to increase our revenues, decrease our operating losses, and eventually reach profitability,” its filing read. “However, there can be no guarantee as to when we will eventually reach profitability, if at all.”

Most users are still on Slack’s free plan

Across all organisations and groups that have deployed Slack, daily active users now exceed 10m.

However, just 88,000 of 600,000 organisations using Slack are actually paying for it.

No paying customer is so big it generates more than three per cent of Slack’s growing revenue, while 36 per cent of sales come from outside the US.

Slack could hit $50bn valuation by 2025

Still, the sky appears to be the limit in terms of Slack’s market cap potential.

Alon Kuperman, director at dealmaker GP Bullhound, said in the long term Slack could beat a valuation of $50bn.

“Slack has transformed internal collaboration and has the potential to become one of the most significant enterprise software companies globally,” he said.

“While it has benefited from a first mover advantage in a large and growing market, competition is becoming fierce as Microsoft, Facebook and Google have entered the space.

“Maintaining market share, particularly in the enterprise segment, is key and Slack needs to invest further in product and cyber security, especially as it targets larger customers. Overall we remain bullish on the company’s prospects and excited about what is yet to come.”

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