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The risk with any IPO where you see a 30-40% pop means the company sold shares below what they were worth, diluting the cap table more than necessary, because t

The risk with any IPO where you see a 30-40% pop means the company sold shares below what they were worth, diluting the cap table more than necessary, because they needed dollars in the bank. Since Slack has tons of cash in the bank, they don't need to raise any capital - just provide liquidity to shareholders/employees. So this makes 100% sense for them. If they need to raise money later, they can do so at the market-clearing price, rather than the low-ball number that the investment bankers usually give them so they can allocate "instant profit" IPO shares to their wealth management clients...

ProfessorLayton 8y ago
It is worth noting that investment banks don't just buy shares "below what they were worth", the shares are underwritten, which is priced in.
misiti3780 8y ago
how do you know how much cash they have in the bank ?
- jzl 8y ago
  They've said it themselves multiple times: https://techcrunch.com/2018/08/21/slack-confirms-it-has-raised-427m-at-a-post-money-valuation-of-over-7-1b/ https://techcrunch.com/2018/08/21/slack-confirms-it-has-rais... In previous rounds, Slack’s CEO and co-founder Stewart Butterfield has said that the company raises “opportunistically.” That is, it doesn’t have to raise money because it’s already making money and still has some in the bank, but as long as VCs are knocking, it’s worth taking the funding if it’s coming in at good valuations because you never know what might lie ahead. https://bits.blogs.nytimes.com/2015/04/16/is-slack-really-worth-2-8-billion-a-conversation-with-stewart-butterfield/ https://bits.blogs.nytimes.com/2015/04/16/is-slack-really-wo... And as a board member and a C.E.O., I have a responsibility to our employees, to our customers. And as a fiduciary, I think it would be almost imprudent for me not to accept $160 million bucks for 5-ish percent of the company when it’s offered on favorable terms. We don’t have an immediate use for that money. But it increases the value of our stock and can allow potential employees to take our offers, and it reinforces the perception for our larger customers that we’ll be around for the long haul. All of that stuff.
JumpCrisscross 8y ago
> risk with any IPO where you see a 30-40% pop means the company sold shares below what they were worth Can't find the study at the moment, but it basically showed first-time VCs like a pop. Long-time VCs don't care. For an investor holding through an IPO, the dilution from the pop far outweighs the positive press from it. Those headlines sit comfortably in a Fund II pitch deck.

ProfessorLayton 8y ago

It is worth noting that investment banks don't just buy shares "below what they were worth", the shares are underwritten, which is priced in.

misiti3780 8y ago

how do you know how much cash they have in the bank ?

jzl 8y ago
They've said it themselves multiple times: https://techcrunch.com/2018/08/21/slack-confirms-it-has-raised-427m-at-a-post-money-valuation-of-over-7-1b/ https://techcrunch.com/2018/08/21/slack-confirms-it-has-rais... In previous rounds, Slack’s CEO and co-founder Stewart Butterfield has said that the company raises “opportunistically.” That is, it doesn’t have to raise money because it’s already making money and still has some in the bank, but as long as VCs are knocking, it’s worth taking the funding if it’s coming in at good valuations because you never know what might lie ahead. https://bits.blogs.nytimes.com/2015/04/16/is-slack-really-worth-2-8-billion-a-conversation-with-stewart-butterfield/ https://bits.blogs.nytimes.com/2015/04/16/is-slack-really-wo... And as a board member and a C.E.O., I have a responsibility to our employees, to our customers. And as a fiduciary, I think it would be almost imprudent for me not to accept $160 million bucks for 5-ish percent of the company when it’s offered on favorable terms. We don’t have an immediate use for that money. But it increases the value of our stock and can allow potential employees to take our offers, and it reinforces the perception for our larger customers that we’ll be around for the long haul. All of that stuff.

JumpCrisscross 8y ago

> risk with any IPO where you see a 30-40% pop means the company sold shares below what they were worth Can't find the study at the moment, but it basically showed first-time VCs like a pop. Long-time VCs don't care. For an investor holding through an IPO, the dilution from the pop far outweighs the positive press from it. Those headlines sit comfortably in a Fund II pitch deck.