Slack Is Going Public, Whatever

Today Slack Technologies Inc. will go public by a direct listing, with its stock opening for trading on the New York Stock Exchange. Normally a private company goes public by an initial public offering: It hires investment banks to market its stock to investors, the investment banks build a book of demand, and then, on the day of the IPO, the company sells a whole bunch of shares, all at once, all at the same price, to those investors. Often the company’s pre-IPO shareholders—its early investors, employees, executives, etc.—will also sell some stock in the IPO, at the same price as the company.

And then, for a while after the IPO, none of those early investors will sell any more stock: Usually the company and its pre-IPO shareholders will sign lock-up agreements promising not to sell any more stock for at least six months after the IPO. (The idea is that the bankers can tell the buyers in the IPO that no more supply will be coming for a while, that if you want stock you have to buy in the IPO.) And of course for a while before the IPO, none of them will usually sell, in part because the IPO is a big marketed event that represents the best chance to get a good price for the stock, but also in part because it is private stock and it’s hard to sell; you can’t just call up your broker and tell her to dump your stock. The IPO is a single salient point in time: There is no supply of stock for a while, then there is a big sale of stock all at once, and then there is no new supply again for a while. If you want to sell, or buy, the IPO is your best chance of doing that.