The graph above shows the cumulative rise in relative sentiment of Slack, from 28 days before the IPO (we are up to Day 27 for Slack, as seen on the chart) compared to the same for Uber, Lyft and Pinterset. Later today it will have its IPO, and we are curious to see if this is predictive of stock price.
As you can see, its map of sentiment over the last week or so is matching Lyft’s very closely. Uber’s relative sentiment tailed off in the last days, whereas Pinterest’s was far higher.
So, what does this predict for Slack’s IPO price going forward? If the leadup is extrapolated forward, one would expect a post IPO performance similar to Lyft’s, i.e.: a stock price that rises pre IPO* but “goes sidewards” over the early days (as opposed to Uber which fell and Pinterest, which rose).
Caveats are that Slack is not in the same industry as Lyft, and also has opted for a “Direct Public Offering” (DPO) not an “Initial Public Offering” (IPO). The difference is as follows (Investopaedia):
The two main categories of IPOs are best efforts and firm commitment deals. In a firm commitment deal, the investment bankers who underwrite it promise to raise a specific minimum amount for the issuer. By contrast, no such guarantee is made with respect to a best efforts deal*. As a result, the fees paid by the issuing company to its underwriters on firm commitment deals are higher, to compensate for the added risk. By choosing a DPO, Slack essentially has opted for a low-cost version of a best efforts offering.
Tune in tomorrow for the next exciting instalment….
*A DPO makes it difficult to know if the mentioned price of $26 is a realistic estimate of a set minimum price or not, and whether in an IPO this would have beeb raised. Lyft increased its pre IPO price, had a “pop” on its first day, then dropped below its IPO price after a few days trading.