Going Public: How a Small Group of Silicon Valley Rebels Loosened Wall Street's Grip on the IPO and Sparked a Revolution by Dakin Campbell

Author:Dakin Campbell [Campbell, Dakin]
Language: eng
Format: epub
Tags: Business & Economics, Banks & Banking, Consumer Behavior, Free Enterprise & Capitalism
ISBN: 9781538707883
Google: fRaAzgEACAAJ
Publisher: GrandCentral
Published: 2022-07-26T20:28:03+00:00

On Tuesday, June 11, 2019, Slack provided guidance to investors that it expected its revenue to surge as much as 50 percent—to $600 million—in the current fiscal year. It also said it would begin trading the following week under the ticker symbol WORK.

The following Wednesday, June 19, the New York Stock Exchange published its reference price for Slack—$26—valuing the company at $15.7 billion.

The next morning, Butterfield rang the bell at the New York Stock Exchange.

He also sat down for an interview with CNBC’s Andrew Ross Sorkin before the stock started trading. Wearing a buttoned-up slate-blue suit over a white t-shirt, he sat on an outdoor stage that the network had set up across Wall Street from the NYSE, at Federal Hall.

Butterfield spoke rapidly as he answered Sorkin’s questions about why Slack had chosen a direct listing. Behind the Slack founder, the marble facade of the NYSE building was draped in a purple flag bearing his company’s logo. Butterfield was minutes away from becoming a billionaire.

“The big thing for us was—in a traditional IPO, it’s the company that’s offering shares and you might raise, you know, a billion dollars, or something like that,” Butterfield said. “When you raise a billion dollars you dilute existing shareholders by issuing new shares. So we’re not doing that, we are just opening it up for trading.”

Sorkin pointed out that the chief reason Slack could do this was because it had about $800 million in the bank. “So this is unusual, not a lot of companies can actually pull this off,” he said, adding, “but also, you’re rewriting the model to some degree. Wall Street, I imagine, did not like this.”

Butterfield, his voice rising in pitch, pushed back.

“Everyone says they like it. We’ll see… I don’t know how much they really like it,” he said, smiling softly before going on.

“I think there are a lot of investors who are used to a model where they get this small allocation and they wanted a big one,” he said. “In a direct listing, at least they have the opportunity. I mean, I think you saw that with Spotify, some early institutional investors taking huge positions on Day 1, whereas in a traditional IPO they might have only got $25 or $50 million.”

Sorkin moved the conversation to fees, asking Butterfield how other companies considering something like this—and he name checked Airbnb—should think about the fee savings.

“The savings weren’t that great, to be honest, and that’s certainly not the motivator,” the founder said. (The company would pay its advisors $22 million, compared to the $85 million that Snapchat paid its advisors when it went public in a traditional IPO in 2017.) Butterfield explained that the company liked the direct listing because it didn’t require issuing new shares to raise money it didn’t need. The stakes of existing investors weren’t diluted. “The big one for us was not having to raise the capital.”

Butterfield stared off-screen for a couple of moments before continuing his answer. “One of the hopes for a company like us is that there is not too much volatility.

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