Slack is a 'very significant' company: IPO ETF manager

Jennifer Shanker
·Segment Producer
Updated

Renaissance Capital offers an ETF (IPO) that includes a basket of all companies that recently went public. The ETF is up 37.3% so far this year.

With the IPO index hitting a record high this year, investors will be looking to add newer public offerings, such as Uber (UBER) and Beyond Meat (BYND), to their portfolios.

“A lot of indices are looking at Uber. They don't own Uber in their portfolio. They don't own Zoom Video (ZM) in their portfolio, Pinterest (PINS),” Kathleen Smith, principal of Renaissance Capital, said on Yahoo Finance’s The First Trade. “And so these companies that have gotten into the IPO market are in this index, and will then be picked up in time.”

The next big tech unicorn, work messaging software company Slack, is set to make its market debut Thursday through a direct listing. (A direct listing means it didn't have investment bankers pitch its shares to institutional investors, and will sell shares directly on the New York Stock Exchange under the ticker WORK, which will be immediately available for trading).

This will be the second direct listing in the U.S. since Spotify (SPOT) debuted last year. If Slack were to follow in the audio streaming platform’s footsteps, it would be off to a good start. When Spotify came to market, the NYSE set its price at $132 per share, and the stock opened 25% higher at $165.90.

Spotify is now trading about flat with the price it began trading in April 2018. “So it's done alright, but, you know, it took some time to get into public markets. And it was a very big direct listing. In the case of Slack, it looks like the company could be valued at $16 or $17 billion,” said Smith.

SAN FRANCISCO, CALIFORNIA - APRIL 02: A view of Slack headquarters on April 02, 2019 in San Francisco, California. Workplace messaging company Slack Technologies Inc. announced plans to list its shares on the New York Stock Exchange. (Photo by Justin Sullivan/Getty Images)
SAN FRANCISCO, CALIFORNIA - APRIL 02: A view of Slack headquarters on April 02, 2019 in San Francisco, California. Workplace messaging company Slack Technologies Inc. announced plans to list its shares on the New York Stock Exchange. (Photo by Justin Sullivan/Getty Images)

“This Slack direct listing will be extremely important,” Smith said. “[It will be] the second-largest float in the IPO market so far this year. A very significant company. The business is a real strong business, high growth. But I think the thing that has to be reconciled most is the valuation of this company at $17 billion, is going to be an enormous multiple.”

Jennifer is a Production Assistant for Yahoo Finance. Follow her on Twitter @shankerjennifer

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