Friday 21 June 2019 4:14 am

DEBATE: Slack has gone public with a direct listing, but is this type of ‘non-IPO’ just a fad?

Neil Wilson is chief market analyst at
Elisabeth Cowell
Elisabeth Cowell is a partner at Newgate Communications.

Slack has gone public with a direct listing, but is this type of ‘non-IPO’ just a fad?

Neil Wilson, chief market analyst at, says YES.

Direct listings can work, and you may well get superior price discovery, but they’re suitable only for a relatively small number of firms and will never replace the traditional IPO, complete with its roadshow and bell-ringing razzmatazz.

Direct listings work if you don’t need to raise money and simply want to let employees cash out. Slack has $800m in cash in the bank – it didn’t need to raise a penny. But if you really want to attract fresh capital to expand and grow the business, there is no option but an IPO.

Most firms are not famous tech unicorns that have spent years in private hands and gone through multiple rounds of fundraising. For most of the unknown Aim-listed stocks, for example, a direct listing is simply out of the question. Without the underwriting process, they’d be taking an unacceptable risk.

And if you want to attract the big institutional funds, those that have the deep pockets and experience to stick with you for the long haul, then you’re better off with an IPO.

Elisabeth Cowell, partner at Newgate Communications, says NO.

Call it Silicon Valley driven hype if you like, but direct listings are here to stay.

Before Slack used the hitherto little-known method to go public, Swedish music streamer Spotify executed its own direct listing. Its desire to deliver a liquidity event which would reward existing shareholders sat front and centre of its mission to enter the equity markets last year.

Unlike a “traditional” IPO, a direct listing does not involve lock-ins and restrictions for existing shareholders. It was therefore a great fit for Slack and its goals.

Of course, for those companies more focused on growth capital, IPOs are not going anywhere. Private equity and venture capital funding is not appropriate for everyone, and the fantastic access to capital that the equity markets provide means that the IPO, with its book-building and investor roadshows, will never become obsolete.

But this isn’t an either-or scenario. It’s time we dropped the false “non-IPO” versus IPO narrative.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.