Slack Technologies stock was made available through a direct public offering (DPO) on the New York Stock Exchange (NYSE) on June 20 under the symbol “WORK.” Unlike an initial public offering (IPO), which is how the vast majority of companies that go public with their shares raise capital, the Slack DPO made the stock
Main Takeaways: How to Buy Slack (NYSE: WORK) Stock
- Pick a broker. We recommend Webull, E*TRADE and Interactive Brokers.
- Practice trading before you buy. Let yourself get comfortable with the software so you can trade with confidence.
- Fund your account. You can usually fund online brokerage accounts via a bank transfer or with your debit card.
- Place an order for WORK. You’re now an early owner of Slack stock!
Slack: Company and Stock History
Slack was originally used as a tool in the development of an online game called Glitch. According to the company, “Slack” means a “Searchable Log of All Conversation and Knowledge.”
Slack is a cloud-based collection of groupware (also known as collaboration software) and other online services. Slack’s groupware is designed as a collaboration hub to assist people involved in a common job or project to attain their goals.
Slack has seen enormous growth in its user base since its online release in August 2013. The company currently has 10 million users in 150 countries, including 600,000 organizations, 500,000 developers and 95,000 paying customers who actively use Slack on a daily basis. Slack users generate over one billion messages on the platform every week.
The Slack website and interface can be used immediately to connect to other Slack users directly or in specific work groups, and the basic service is free. Anyone who has used Slack can attest to its ease of use and the efficiency it provides when communicating with other people via text or voice.
Future Outlook for Slack
Slack has ambitious plans for the future, despite the fact that the company is still losing money. The firm’s growth in sales to corporate clients has quadrupled since 2016, rising from 25% of total revenue to its current level of 43%. Revenues have also increased by double digits for the last 3 years.
Slack reported a Generally Accepted Accounting Principles (GAAP) first-quarter net loss of -$31.8 million, or -$0.26 per share. On a non-GAAP basis, Slack reported a smaller net loss of -$0.23 per share.
Furthermore, revenue for the quarter came in at $134.8 million and rose by +67% year on year. Billings came to a total of $149.6 million, showing an increase of +47% year on year.
Slack also reported that its net loss for the fiscal year ended on January 31 was -$140.7 million, higher than the loss of -$108.9 million seen the previous year. Slack still reported annual revenue of $400.6 million, which was almost double the amount from the previous year.
Slack’s revenue guidance for its second quarter of $139-$141 million would show an increase of 51%-53% year on
According to the company’s S-1 filing with the Securities and Exchange Commission (SEC), Slack’s registered shareholders will resell 118,429,640 shares of the company’s existing Class A common stock that they currently hold.
Slack reported that 181 million shares of its Class A stock, with the omission of restricted stock, were held by officers and employees, while 324 million Class B shares were held by registered stockholders.
In the chart below, you can see Slack’s annual recurring revenue (ARR) of each cohort (groups of people) over five different annual time periods. Each cohort represents paid customers who made their first purchase from Slack in the given fiscal year.
Why You Might Want to Buy It
Slack’s Messaging App: Slack’s messaging app continues to gain ground and has replaced email as the best way to communicate for many companies. Slack could be the new standard messaging platform worldwide, which could significantly improve revenues and earnings depending on how the company leverages its position.
Enterprise Work Platform: In addition to its potential for becoming the world’s standard messaging platform, Slack could also become the global standard for collaborative and work-related groupware. The company already has a substantial lead in the field, which could be taken to the next level, as the company’s notable growth in sales to corporate clients is already evident.
Possible Takeover: A company with considerably more resources could eventually buy Slack. Companies that already have a stake in the market, such as Microsoft or Facebook, could be especially good buyer candidates. Even the suggestion of a major merger or acquisition involving Slack could increase the demand for and value of its shares in the post-DPO market.
No Minimum Holding Period: Unlike an IPO, in which initial participants typically have a lock-out period of at least 30 days during which they cannot sell their newly issued stock, in a DPO, buyers can sell their shares right after they buy them.
Considerations Before You Buy
Uncertainty of Stock’s Initial Valuation: According to Slack’s most recent private investor funding in August 2018, investors buying Slack shares gave the company a valuation of $7.2 billion. More recent analyst estimates have put the value of the company at closer to $17 billion.
In addition to the outstanding shares, 4% of that $17 billion valuation would go toward covering $438 million in employee stock option liabilities and $185 million in debt omitted from Slack’s balance sheet. The company’s Class B stock traded between $8.37 to $31.50 on a converted basis from January 31, 2017 through May 30, 2019, with an average price of $26.38, according to Slack’s S-1 SEC filing.
Increased Competition: A slew of companies offering essentially the same services have recently begun eating away at Slack’s market share. Options such as Alphabet’s Google Hangouts, Facebook’s Workplace, Telegram, Microsoft Teams, Quip, Monday and Chatter are just a few of these competitors.
Slowing Revenue Growth: Slack’s revenues have steadily declined over the past 3 years as more companies have begun crowding the market. This could adversely affect Slack’s stock price going forward once it’s publicly traded.
Reduced Shareholder Rights: Slack’s DPO just involves the company’s Class A shares, which have only one vote per share. This effectively puts the control of the company in the hands of the holders of its Class B stock, which has 10 votes per share. The good news is that 10 years after the company’s S-1 filing, its Class B stock’s voting rights will revert to only one vote per share.
How You Can Buy Slack Stock Right Now
Because Slack shares will be offered directly to the public on June 20, any reputable stockbroker with access to trade NYSE stocks can be used to buy Slack stock using the ticker symbol WORK as of that date. Place a market or limit bid on WORK stock on the opening day of the DPO with your broker and follow the steps listed below.
Step #1: Pick a Broker
Before you can buy Slack stock, you must have an account with a reputable stockbroker. Knowing your needs before you choose a broker will make your decision much easier.
Take a look at a few of our favorite online brokers below.
|Broker||Best For||Commissions||Account Minimum||Choose your platform|
Get started securely through Webull’s website
1 Minute Review
Webull, founded in 2017, is a mobile app-based brokerage that features commission-free stock and exchange-traded fund (ETF) trading. It’s regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Webull offers active traders technical indicators, economic calendars, ratings from research agencies, margin trading and short-selling. Webull’s trading platform is designed for intermediate and experienced traders, although beginning traders can also benefit. Webull is widely considered one of the best Robinhood alternatives.
||$0.005 per share minimum $1 and maximum 0.5% of trade value; volume discount available||$0 for cash account, or a margin account with $2,000||
Get started securely through Interactive Brokers’s website
1 Minute Review
If you consider yourself a sure-footed professional trader, Interactive Brokers might be a major possibility for you, particularly if you’re adept at navigating tricky trading platforms (can you say 124 option indicators?) or have done more than just dipped your toe a “coupla times” into the complex world of international markets.
Lower minimum activity requirements ($3/month) and opening account minimum requirement ($3,000) for clients 25 and younger.
||$6.95 for fewer than 30 trades/quarter.||$0||
Get started securely through eTrade’s website
1 Minute Review
E-Trade is best known for its user-friendly browser, desktop and mobile trading platforms and its extensive research and educational information. E-Trade may not have the lowest commissions compared to discount online brokers, but customers certainly get their money’s worth from E-Trade’s comprehensive offerings.
60 days of commission-free trades with deposit of $10,000 or more
Step #2: Practice Trading
If your objective in buying Slack stock is for investment purposes and nothing more, then all you have to know to place an order is the price you’d like to pay and the amount of stock you want to acquire at that price. If you’re unsure of the price, place a market order instead.
On the other hand, if you want to watch the market to get familiar with how Slack stock trades, especially since the stock has never traded publicly on an exchange, consider opening a virtual or demo account with at least one of the brokers you’re considering.
A virtual trading account works just like a live account except that you don’t have to risk any funds when you trade. Ideally, you can open several accounts with different brokers to evaluate their platforms and services. Regardless of whether you buy Slack or any other stock, using a demo account to practice in before you begin live trading can generally benefit you.
Step #3: Fund Your Account
Once you’ve practiced trading in a demo account and have built enough confidence in your trading strategy and ability to operate the platform, you can fund an account with the broker you’ve chosen. You can pick a different broker than the one where you opened a demo account, though you might be better off just funding your account with the same broker if its services seem to meet your needs.
Step #4: Buy Slack Stock
Funded an account with a reputable broker? You can now place a market order at the opening. This will let you obtain the stock at its opening price, which could be quite high. You could instead watch the price action at the stock’s opening and place a limit order bid at a lower price after the initial flurry of activity has passed.
You may want to place a good ‘til canceled or GTC order at a low price and wait to see if the order is filled if you’re planning on buying Slack stock for investment purposes. Once executed, you could protect your position by placing a stop-loss order or place trailing stop orders if the stock starts rallying.
Should You Buy Slack Stock?
The results of a DPO versus an IPO have significantly different impacts on both the company and its prospective investors. For starters, a DPO eliminates the middlemen, or the investment bankers that normally sell newly-issued shares to the investing public after first purchasing the shares from the company.
A stock issue
You’re probably best off waiting until the initial excitement has passed and market volatility cools off before putting in a bid. This is because most new tech stocks tend to gap higher when they first trade but can later stage a pullback.
The stock’s initial performance could also give a strong indication of whether WORK stock would make a good long-term investment or a decent stock to trade using short-term strategies.