When Spotify (SPOT) opted for an untraditional method of direct listing in April, it raised quite a few eyebrows. Shareholders and the company management were barraged with questions, while many market observers remained skeptic over the consequences of a larger tech startup opting for this method.
However, the public listing turned out to be a success, with shares closing 12% higher than its reference price. Following the public listing, the Swedish company was valued at approximately $26.6 billion and the shares stabilized, unlike what was expected by some critics.
Though the hullabaloo around direct listings had died down since then, two popular tech companies may be opting this method next year. According to Recode, Airbnb and Slack may go for direct listing, though there has not been an official confirmation.
Direct listing is the method where pre-existing shares owned by shareholders, employees or promoters are offered to the public without the help of intermediaries including underwriters, investment banks or broker-dealers.
The elimination of middlemen helps in saving underwriter charges and other fees but comes with its own set of risks. There would be zero promotions and the listing stands vulnerable to high stock volatility.
Airbnb, which was last valued at $30 billion, is likely to go public by the end of next year or in early 2020. The company’s CEO Brian Chesky had reportedly met Spotify chief Daniel Ek a few months back to discuss direct listing.
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Meanwhile, Slack is also mulling public listing, Recode reported. The enterprise workplace messaging company, only days ago, had hired Goldman Sachs to help with its public listing, though nothing is yet confirmed. The company, which has 8 million in DAU, is likely to go public in the second half of next year.
On the other hand, the two ride-hailing companies – Lyft and Uber – which had filed for public listing last week, will probably opt for the traditional IPO method.