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Slack Technologies Inc. is looking for a better destiny than Spotify Technology SA in direct registration.
The music streaming service reminded tech unicorns last year that companies did not need to issue new shares or raise money through a traditional offering if they wanted to go public. Slack is now following in his footsteps. The business discussion company filed direct registration documents on Friday.
Direct listings differ from traditional initial public offerings in that the company does not issue new shares and does not seek to raise funds during the public opening process. Listing allows existing shareholders to sell their shares to the public. After direct registration of Spotify, many users said that this approach could be used by other startups, given the lack of dilution of the actions and lockdown restrictions required.
But the Spotify stock
SQUARE, + 2.53%
has not been well received since the company made its public debut, with equities rising only 3% against the benchmark price at the time of the bid and down 18% from the price. opening. Meanwhile, the S & P 500 index
SPX, + 0.14%
has gained 11% since Spotify became public.
Slack hopes his shares will be better appreciated on Wall Street, although the company is unlikely to be subjected to a traditional roadshow that allows him to explain his financial data to banks and investors in the same way as companies who opt for the route. of the standard IPO. Late Monday, Slack updated its S-1 with the Securities and Exchange Commission to record nearly 117 million shares. Slack also changed the stock ticker he plans to use for trading on the New York Stock Exchange in "WORK" of "SK," as he had already stated in his previous S-1.
The Slack repository reveals an activity whose turnover slows revenue growth but reduces losses, as well as the high dependence on several hundred key customers, less than 1% of its paid customers, for a significant part of its sales. Here are five things to know about the company:
Deceleration of income
Slack's annual revenues reached $ 400 million for the fiscal year ended in January, but growth slowed compared to the previous period. The company's revenue increased 82% from $ 220.5 million in 2018, down from a growth rate slightly above 100% a year earlier.
Founded in 2009, Slack admitted in its prospectus that it had "limited experience in determining optimal prices for Slack". The company anticipates that it may need to periodically change its pricing model.
The courier company made progress in reducing its losses, recording a net loss of $ 140.7 million last year, up from $ 181 million a year earlier. Slack continues to see significant investments in its future, strengthening its sales force and customer experience teams and increasing its marketing spend.
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Highly dependent on large customers
Slack had 88,000 paying customers by the end of January, but only a small fraction of them accounted for a huge portion of the company's revenue.
The record revealed that Slack has 575 customers – about 0.7% of total paying customers – each generating more than $ 100,000 in annual recurring revenue, up from 298 a year ago. This cohort contributed about 40% of Slack's revenue last year, the company said. Slack finds the measure indicating his ability to attract large companies to his platform. The company bills its customers based on the number of users of its platform.
In contrast, Slack has a large base of organizations using the service for free, including more than 500,000 at the end of January. "This model facilitates fast and efficient user adoption, especially by allowing users to access Slack without payment frictions or formal business interaction," the prospectus states. "We believe that free use helps potential customers leverage Slack's value and allows users to get the message across organically through their networks and organizations."
Work hard or hardly work
The relaxation depends on the increasing integration of the workplace culture so that more users of a given business start using the platform and paying the price.
The company said it had 10 million daily active users on its free and paid levels in the three months ended in January, although it did not provide a breakdown between the two. Slack revealed that "many" of its paying customers have thousands of active users, while the largest paid customers of the company have "tens of thousands" of daily users.
During the last week of January, Slack saw its base of free and paid users spend more than 50 million hours combined with the service, sending over a billion messages. During a normal work day during this period, paid subscribers were connected to Slack for an average of nine hours and spent more than 90 minutes actively engaging in the service.
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In competition with giants
Uber Technologies Inc.
UBER, + 2.57%
and Lyft Inc.
LYFT, -1.74%
Both made lofty mission statements in their IPO filings, promising to "create opportunities" through mobility, but Slack played things in a simpler way. "Our mission is to make people's work life simpler, more enjoyable and more productive," the company said in its prospectus.
Slack acknowledged that he was facing at least one major player when it came to simplifying work communications. The company mentions Microsoft Corp.
MSFT, + 0.05%
"Main competitor", but admitted that its current partners, notably Atlassian Corp. PLC
TEAM, + 1.78%
Google Alphabet Inc.
GOOGL, -0.59%
and newly public Zoom Video Communications Inc.
ZM, -3.19%
could offer new products to compete with the Slack platform.
"Some of our major competitors have a much broader product offering and leverage their relationships with other products or integrate features into existing products to save time, thereby discouraging users from buying Slack, including selling at zero or negative margins, bundling products, or closed technology platforms, "said Slack in his paper.
Another two-class structure
Slack, like many other high-tech start-ups, will have a two-class share structure that concentrates voting power between executives and other stock holders before Slack's expected listing. The Company will list the Class A Shares on the NYSE, but its Class B Shares will each have 10 times the voting rights of each Class A Share.
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