10 ms·
Slack Is Going Public Without an IPO – How a Direct Listing Works
- _eht 7y ago*went
- satya71 7y ago50% pop, not bad. Underwriters got $0 of that pop, very nice for whoever pounced early.
- nodesocket 7y agoSure it's up 50% from the "reference price", but publicly for you and me retail investors we had NO chance at that gain. You'd have been super lucky to get some shares at where it opened at $38.88 (12:08 EST). It immediately shot up to daily high of $41.95 which is most likely where retail trades would have executed at (assuming you used a market order, which you never should). Always buy with limit orders. See the following screenshot of the graph of today[1] of $WORK for reference. [1] https://imgur.com/a/ULlMHMl https://imgur.com/a/ULlMHMl
- FartyMcFarter 7y ago> assuming you used a market order, which you never should). Yeah I don't get why market orders even exist. If you're doing something that usually costs thousands to millions, is it ever a meaningful benefit to saving a click or two and a few keystrokes? If my broker had an option to remove my ability to do market orders (sell or buy) I would immediately enable that.
- derefr 7y agoWould it still be called a market order if you were denominating the order in dollars-converted-at-moment-of-sale? I.e. "buy however many shares I would get for $500, I don't care how many or few that is at the time." That seems more useful, and still caps your losses, while offering something limit orders don't.
- tanderson92 7y agoThis is still a market order (ignoring rounding).
- TomVDB 7y agoI'm not a high frequency trader. When I want to sell (all highly liquid shares), I've made that decision on other factors than a 0.1% variation of the listed stock price. What I care about is that it sells. It's hold-over from the dotcom days when I saw colleagues sell options with a limit order just above the current listed price that never got fulfilled in an a constant down market.
- tylerapplebaum 7y ago> Yeah I don't get why market orders even exist. Have you ever needed to exit a trade in a hurry? Or been buying something on the way up?
- evanpw 7y agoA marketable limit order is strictly better: "I'll sell at the best price available, but no more than X% worse than the current price" vs. "I'll sell at literally any price". In most cases, they give identical results, except in certain catastrophic cases where the limit order will save you (e.g., flash crash).
- deanmoriarty 7y agoI have traded literally several million of dollars (especially counting all the tax loss harvesting I’ve done) over the years as a private investors in highly liquid index funds, and always use market orders. I don’t think I’ve ever been shortchanged...
- asdfasgasdgasdg 7y agoI only use market orders. I generally intend to hold a stock for at least a few years when I buy it. What advantage do limit orders offer me?
- FartyMcFarter 7y agoProtection from events like flash crashes.
- ars 7y agoIf you do a limit order that is higher than the current market order, you stand a pretty decent chance of executing at that price rather than at the more beneficial market price. Market order just means sell it at what it's worth right now.
- kgwgk 7y agoI’m sure there may be “failures” sometimes, but shouldn’t in principle the transaction be done at the NBBO?
- ineedasername 7y agoWould you mind explaining the difference between a market order & a limit order?
- patmcc 7y agoA market order is "I want to buy 10 units, no matter what the market price is" and a limit order is "I want to buy 10 units at a price no more than $50" or whatever.
- mlthoughts2018 7y agoFor retail investors in a situation like this, it probably doesn’t matter. You would create a buy limit order at a price somewhere high enough that it’s likely to execute no matter what the price is doing, so the effect is basically the same as a market order. The advice to generally use limit orders is good though. Rarely would a retail investor need a market order.
- dannyw 7y agoAll retail brokerages, and even many professional brokerages send market orders as limit orders anyway. No one wants 100% slippage.
- ineedasername 7y agoLimit orders certainly seem to make a lot more sense, less risk. Is there a use case for market orders that's Superior to limit orders?
- ericabiz 7y agoI set a buy order yesterday through Schwab and got a notification today that it executed at $38.50, which as far as I can tell was the retail opening price. It executed at 12:08 Eastern.
- nodesocket 7y agoNice work. Was it a market order or limit? If limit, what did you set as the limit price? I waiting and eventually executed my order at $40.36.
- ericabiz 7y agoI set a limit $50 because they didn’t announce a price as far as I could tell, and I knew I was going to be working today and couldn’t pay attention. It did cost me some because I could have bought more shares had I set a lower limit, but I am happy the trade executed at a low price.
- myvoiceismypass 7y agoI set a limit order at 11:42 am (robinhood) today for $39.50 and it executed at 12:08 for $38.50
- AznHisoka 7y agoAnyone proclaiming it was a 50% pop is misleading. The opening price was around $39 so it essentially finished flat for the day. The “reference price” is meaningless because it meant absolutely nothing. It wasnt the price it opened at. So why should we base the % change from that imaginary price. And this is was a direct listing so not even an underwriter got a 50% pop. The media just wants to make things sound more impressive than it really are.
- youeseh 7y agoI know this is an apples and oranges comparison, but I just find it fascinating how value is derived in society. The current stock price, Slack's market cap is half of Tesla's. And, a lot of people think that Tesla is overvalued.
- georgeecollins 7y agoIt is really hard to make a financial argument for the value of a stock that makes no profits and is has a low to negative book value. Clearly there are valuable companies in this category such as Amazon and Facebook early in their days as public companies. But trying to figure out what they might be worth someday is an exercise in predicting what the future of the world might be. It is not like making a calculation on the back of an envelope. So to the OP, yeah I totally agree. It's fascinating.
- mruts 7y agoHypothetically, a companies value should be a sum of it’s expected infinite cash flows divided by the discount rate. If a company lost $10 one year, $5 another, and broke even the third a guess of making money the fourth year is probably more reasonable than a guess of making the average, even with a marginal book value. Therefore, I don’t think it’s that surprising that companies losing money are still worth a lot. This isn’t always a reasonable way to think of things, though. It’s important to consider the actual realities of the business. For Slack, I think it’s largely fine. There really shouldn’t be a hard constraint preventing them from making shit tons of money. Uber and Lyft are a different story. I have a hard time imagining a situation in which those companies will ever be profitable, even with self-driving cars, save one buying out the other.
- georgeecollins 7y agoDiscounted cash flow analysis is not what is going on here. Looking at it historically, FB went public with a valuation that its web business at the time could never justify. If you assume people who bought at the price were making a rational calculation, they weren't valuing the business cash flow, they were valuing something else Facebook had. A technical capability, the management, a brand, the things that let them extend their business to mobile messaging and acquire WhatsApp and Instagram. What happened wasn't just cash flow growth. Ditto for Amazon and Google. I think that is what is going on with Uber. Their current core business will never earn enough to justify their valuations. Investors assume it will add new divisions and capabilities.
- BubRoss 7y agoIs each slack user really worth $1,600 USD ?
- imjk 7y agoAs a counterpoint, do you think Slack has a growth rate of zero?
- askafriend 7y agoThis is a pretty financially illiterate question... I mean do you really think you can divide the valuation of a company by their user base and think it means anything? I really hope that isn't how you make decisions with investing your personal money...
- kelnos 7y agoThe valuation of a company generally includes the discounted value of expected future revenue streams.
- pimlottc 7y ago> The ticker symbol? WORK. I’m curious how symbols are assigned. Most companies have symbols that are similar to their names. Can companies just choose anything they want? Or do you have to be a big player with connections to score a vanity symbol like this one?
- css 7y agoThey're totally arbitrary. Here is a PDF with the actual rules: https://www.theocc.com/components/docs/clearing/services/nms_plan.pdf https://www.theocc.com/components/docs/clearing/services/nms...
- busymom0 7y agohttps://slate.com/news-and-politics/2003/09/how-do-companies-pick-ticker-symbols.html https://slate.com/news-and-politics/2003/09/how-do-companies... > “The ball’s pretty much in the company’s court, as long as its choice isn’t already in use and won’t offend anyone’s delicate sensibilities. The NYSE requires that companies submit their symbol requests at least 20 days before they mail out notification to shareholders and that they list a first, second, and third choice. The exchange rarely gives a thumbs-down to the preferred option. One notable rejection occurred in 1992 and involved Furr’s/Bishop’s Inc., a Texas-based cafeteria operator that wanted to disassociate itself from its floundering holding company, Cavalcade Holdings Inc. But the NYSE denied the company’s application for the symbol FBI, on the grounds that it might cause confusion with a well-known law-enforcement agency, and Furr’s/Bishop’s was forced to remain CHI on the board. (The beleaguered company, later delisted from the NYSE, eventually changed its name to Furr’s Restaurant Group—FRRG on the ignominious pink sheets—and has since filed for bankruptcy.) Some companies select cheeky symbols, rather than mere acronyms. The father of the trend may be Southwest Airlines, which was first listed as LUV in 1971—a nod to its origins at Dallas’ Love Field. Other semi-clever tags include BID for auctioneer Sotheby’s, FUN for amusement park operator Cedar Fair, and BUNZ for deli chain Schlotzsky’s. It’s a lot easier to come up with something witty if you’re listed on the Nasdaq, as that exchange allows symbols to be up to five letters long; the NYSE sticks with a 3-letter limit.”
- supremerumham 7y ago
- sixhobbits 7y ago> In an IPO, SEC rules typically restrict shareholders from selling shares until six months after the offering. A direct offering makes it much easier for employees and early investors to cash out as soon as the first day of trading. This can be a big help for investors in companies that have waited to go public, which many of the best-known tech companies have been doing for years Is it wrong to interpret this as other people expecting the bubble to pop soon and wanting to pass the bag sooner rather than later?
- esoterica 7y agoInvestors can usually cash out during the IPO itself, they are only banned from trading between the IPO and the end of the lock up period.
- erikpukinskis 7y agoYes. You are imputing intent from action, which is often wrong. Another interpretation: they don’t care for the terms underwriters are offering, and think a better price can be set offering shares directly to investors. And that a good price serves everyone well. Google had a rough go of it, IIRC, and there is some risk that institutional investors will sit the round out without their banking partners running the show.
- cdumler 7y agoThat is possible, but in theory there has been due diligence to verify the company as an on-going concern. Normally the goal of going public is to let those who took the risk in the beginning to get a payout, given that they have had their funds locked up all this time. Those who choose to invest now are taking the risks for access to future returns.
- asr 7y agoNormally the point of an IPO is to raise cash.
- Zarathustra_ 7y ago
- el_duderino 7y agoIt's strange that a site like Fortune (in 2019) still doesn't support or enforce HTTPS.
- zone411 7y ago[deleted - was incorrect]
- tc313 7y agoIt’s not raising any money in this offering; it’s just letting existing investors sell their shares to the market.
- deleted 7y ago[deleted]
- deleted 7y ago[deleted]
- deleted 7y ago[deleted]
- dcolkitt 7y agoThe primary reason for doing a direct listing is because you don't need to raise capital. It's mostly reserved for the case where you want your pre-existing shareholders to access the liquidity of the public markets. In contrast, if you're actually going public to raise more capital, direct listings are a lot riskier. Basically the point of the IPO, and paying investment banks huge fees, is to select and handhold the new investors. The investment bankers perform a lot of work around actually getting supply to meet demand. They're doing roadshows in front of potential investors, getting feedback on the best way to present the company, trying to determine what the market would price the company, etc. They're also making some effort to curate a higher-quality investor base, i.e. those who actually believe in the company's vision and aren't likely to flip the shares for easy money or sell out at the first sign of trouble. The reason for the traditional IPO pop mostly has to do with compensating these types of investors for making a commitment and taking a risk on an unproven stock. Now if it's definitely debatable whether what the company pays in the form of investment banking fees and systematic underpricing is actually worth it. But the point is that for a company like Slack, which isn't raising capital, it's almost certainly not worth it. On the flip side the success of this particular doesn't necessarily tell you anything about how much value a traditional IPO does or doesn't add.