Slack’s unusual approach to joining public markets was chalked up as a success. The US company’s June direct listing, with its catchy WORK ticker symbol, was impressively orderly. Bankers and investors wondered aloud whether initial public offerings might one day become obsolete. Were roadshows and lockup periods for investors selling shares necessary if direct listings worked so well, especially for companies that wanted to trade on an exchange without raising money?
The performance of the group, which specialises in team working tech, suggests IPO bankers have little to fear. Its projection of slowing sales growth has cut its market value by almost a fifth in the space of a few weeks.
On the face of things, Slack had good news to impart in its first set of earnings as a public company . The group raised full-year guidance for revenue growth by 2 percentage points to 52 per cent year on year. This, however, is well below 82 per cent last year and 110 per cent the year before that. That trend looks feeble for an enterprise that is only six years old, predicts expanding losses and was trading at 20 times expected sales before earnings were released.
During the earnings call, founder and chief executive Stewart Butterfield tried to keep attention focused on his group’s ability to hook big clients. The number of customers that spend more than $100,000 a year is up three-quarters in the past year, he noted. Slack could be proud of “win after win with the largest companies in the world”. Yet just as users of Slack’s free subscription plan outnumber paying customers, big customers comprise a tiny fraction of these paying customers.
Retention rates are high and average active usage of 90 minutes per day puts social networks such as Twitter and Facebook to shame. Companies moving workers from traditional offices to co-working or “hot-desk” arrangements like the option of an internal online instant-messaging system, one which supports staff collaboration. A new Shared Channels feature will allow users to communicate with external partners, meaning Slack will encroach further into email territory. The catch is the competition. As long as Microsoft’s rival Teams product remains free with Office 365, Slack will need to come up with more reasons for companies to pay for an alternative.
This article has been amended since initial publication to correct the revenue growth figure for 2017
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