Slack will skip IPO and do a direct listing instead, source says

Slack Technologies Inc. plans to forgo a traditional initial public offering and instead intends to sell its shares to bidders in a direct listing, a person familiar with the matter said.

The messaging platform company is choosing the unusual method for going public because it doesn’t need the cash or publicity of an IPO, said the person, who asked not to be identified because the information wasn’t public. Slack hasn’t filed with U.S. regulators for the listing yet, and the partial shutdown of the federal government makes it unclear when that filing will happen, the person said.

The share sale, which might take place toward midyear, could value Slack at more than $7 billion, according to the person, who added that the San Francisco company’s plans could still change.

A Slack representative declined to comment. The company was valued at $7.1 billion in a $427-million funding round in August.

If Slack goes ahead with a direct listing, it will follow music streaming service Spotify Technology, which began trading in New York using that method in April. In an IPO, underwriters hammer out the number of shares to sell and at what price, then take their fees out of the proceeds from an offering. A direct listing allows current investors to offer their stakes directly to new shareholders priced purely on demand.

Slack’s plans were reported earlier by the Wall Street Journal.

U.S. share listings are facing delays as the government shutdown hits regulatory agencies, including the Securities and Exchange Commission. Anticipated IPOs that may face continuing delays include Lyft Inc., which announced in December that it had filed confidentially for an IPO, and Uber Technologies Inc., which also filed confidentially last month, a person familiar with the matter has said.

Slack’s plans may be more directly affected by the shutdown than if it was pursuing an IPO, as the unusual process is likely to require more interaction with regulators.

Zaleski writes for Bloomberg.