Could Slack Technologies, Inc. (WORK) Crash Even More? The Stock Had Another Big Decline …

More interesting news about Slack Technologies, Inc. (NYSE:WORK) were released by: Fool.com and their article: “Aurora Cannabis Inc. (NYSE: ACB) …

The stock of Slack Technologies, Inc. (NYSE:WORK) is a huge mover today! The stock decreased 4.17% or $1.07 during the last trading session, reaching $24.55. About 6.27M shares traded. Slack Technologies, Inc. (NYSE:WORK) has 0.00% since September 13, 2018 and is . It has by 0.00% the S&P500.

The move comes after 7 months negative chart setup for the $13.36 billion company. It was reported on Sep, 13 by Barchart.com. We have $23.57 PT which if reached, will make NYSE:WORK worth $534.32M less.

Slack Technologies, Inc. (NYSE:WORK) Ratings Coverage

Among 6 analysts covering Slack Technologies (NYSE:WORK), 3 have Buy rating, 0 Sell and 3 Hold. Therefore 50% are positive. Slack Technologies has $4400 highest and $2700 lowest target. $35.67’s average target is 45.30% above currents $24.55 stock price. Slack Technologies had 10 analyst reports since June 26, 2019 according to SRatingsIntel. The rating was maintained by Barclays Capital on Thursday, September 5 with “Overweight”. The firm has “Neutral” rating by Credit Suisse given on Thursday, September 5. M Partners maintained it with “Buy” rating and $3800 target in Thursday, September 5 report. Citigroup maintained the shares of WORK in report on Friday, September 6 with “Neutral” rating.

More notable recent Slack Technologies, Inc. (NYSE:WORK) news were published by: Finance.Yahoo.com which released: “Aramark (NYSE:ARMK) Shareholders Have Enjoyed A 57% Share Price Gain – Yahoo Finance” on September 13, 2019, also Marketwatch.com with their article: “Fabrinet’s stock leads all NYSE losers after downbeat outlook, heads for biggest drop in 5 years – MarketWatch” published on August 20, 2019, Cnbc.com published: “5 things to know before the stock market opens Monday – CNBC” on September 09, 2019. More interesting news about Slack Technologies, Inc. (NYSE:WORK) were released by: Fool.com and their article: “Aurora Cannabis Inc. (NYSE: ACB) Q4 2019 Earnings Call Transcript – Motley Fool” published on September 13, 2019 as well as Seekingalpha.com‘s news article titled: “Slack: Wheels Just Fell Off – Seeking Alpha” with publication date: September 05, 2019.

Slack Technologies, Inc. operates Slack, a business technology software platform in the United States and internationally. The company has market cap of $13.36 billion. The Company’s platform brings together people, applications, and data, as well as sells its offering under a software-as-a-service model. It currently has negative earnings. The firm was formerly known as Tiny Speck, Inc. and changed its name to Slack Technologies, Inc. in 2014.

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Unicorn Valuation Rout Casts Dark Clouds Over SoftBank Group’s Vision Funds

The We Company (formerly known as “WeWork”) might cancel its planned IPO. One of the parties urging for a cancellation is SoftBank Group Corp., …

SoftBank Group Corp. (OTCPK:SFTBF;OTCPK:SFTBY) and its Vision Fund face the risk of paper gains turning to paper losses following the loss in valuation of recently listed portfolio companies and potentially upcoming decreases in valuation of yet private ones.

I already alluded to that risk some months ago, after Uber Technologies Inc.’s (UBER) rather disappointing post IPO performance. Uber shares continued trading downwards since resulting in SoftBank being in the loss zone on its investment in the company.

Now SoftBank is reportedly urging The We Company (formerly known as “WeWork”) to postpone its IPO -which was initially scheduled for as early as this year – in order to prevent its valuation from declining.

Paper Gains Might Turn Into Losses Quickly

SoftBank reported impressive profits from the Vision Fund. The fund accounted for profits of ¥397.6 billion, nearly 60 percent of the company’s total operating income of ¥688.8 billion, in the quarter ended June 30th. This does, however, unrealized valuation gains of ¥408.5 billion. And unfortunately such gains may turn into losses fairly quickly if valuations decline.

The We Company could become the source of such decline in the nearer future. The latest funding round valued the company at $47 billion. However the funding was led by SoftBank meaning the sky-high valuation is in no small part the result of SoftBank’s own investment. In other words: the company itself decided at which level to value the asset which it already owned a good portion of thus in essence creating its own profit out of the air. Yet said profit exists only on paper until the moment when someone else is willing to pay that very same price. As it turns out the public market is not. Thus SoftBank’s eagerness to cancel the listing for the time being.

Now if The We Company cancels its IPO a new problem would immediately arise. Without the proceedings it would need to turn to other sources for further funding. After all the business is still far away from profitability. There are hence but two ways to obtain the necessary capital. Either the company has to borrow money – which would of course put considerable pressure on the balance sheet. The alternative would be another private funding round. But it might turn out to be a rather difficult endeavor to come up with investors willing to provide the necessary amount at a valuation that the public market evidently considers heavily overvalued. So at the end of the day SoftBank would probably be forced to provide the funding itself if it seeks to uphold the valuation level.

And the We Company is not the only such problem. While the investment in Slack Technologies Inc. (WORK) still accounts for considerable gains, the stock has fallen further and further since its listing. And of course Uber as of the time of writing trades at a price at which SoftBank is already several hundred millions underwater on its investment. Since those companies are public by now, SoftBank is unable to simply establish a valuation it deems appropriate through an investment round. Theoretically it could purchase stocks on the open market until such price level would be reached. Yet this would face some obstacles in reality. Suffice it here to say, that such measures are highly unlikely.

Neither should go unnoticed that besides the high profile names that are already public or at are or were at one point in the process of going public, the Vision Fund portfolio contains a host of other private companies. Since most of the companies do not report their financials, it cannot be ruled out that there might be imminent decreases in valuation in other cases as well once a listing happens.

For all the reasons pointed out above the Vision Funds – paper – profits might before long give way to sizable losses.

Vision Fund II Might Come Into Jeopardy

The Vision Fund and its brethren both existing and planned are the centerpiece of SoftBank’s long term strategy. Therefore trouble for the Vision Fund equals trouble for the mother company.

Doubts about the funds ability to achieve expected returns could negatively affect the inception of the planned even larger (about $108 billion in volume compared with the first fund’s less than $100 billion) Vision Fund II. And of course a profitable Vision Fund would certainly help to come up with the $38 billion that SoftBank plans to contribute itself.

It appears questionable to me whether investors would be willing to provide a combined $70 billion for a second fund if the first fails to meet expectations. Among the potential investors are Apple Inc. (AAPL), Microsoft Corp. (MSFT), several Japanese banks and insurance companies National Investment Corporation of National Bank of Kazakhstan, Foxconn Technology Group, Standard Chartered (OTCPK:SCBFF), and yet unnamed Taiwanese “major participants” according to SoftBank. Reportedly, Emirati sovereign wealth fund Mubadala which has already been a contributor to the first fund is considering an investment as well. Some of those institutions might reconsider their commitment if the first Vision Fund underperforms.

Conclusion

The deterioration of the valuations of high priced yet unprofitable unicorn companies seriously endangers the performance of SoftBank Group Corp.’s Vision Fund. It might potentially have a negative effect on investors willingness (and SoftBank’s ability) to contribute to a similar but even larger Vision Fund II. This might be devastating for SoftBank which is in the process of transforming itself into an investment company.

A listing of the first Vision Fund – if indeed it ever has been entertained in a serious fashion – would probably be off the table as well. Instead, rather than unlocking value through a separate listing, the company might be forced to contribute further funds in order to preserve valuations of private portfolio company.

All in all, my formerly neutral outlook for SoftBank turns more negative given the recent developments regarding “unicorn” valuations and the negative consequences that may very well arise for the company.

Disclosure:I am/we are long AAPL.I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: All research contained in this article was done with utmost care. However, I cannot guarantee accuracy. Every reader is advised to conduct his or her own due diligence and research.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

SeekingAlpha

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Slack value rockets as stocks closes up 48.5% in public debut

Other shareholders include Andreessen Horowitz ($2.6 billion), Social Capital ($2 billion), Slack co-founder Cal Henderson ($646 million), and …

Slack is popular is an American collaborative software created by Slack Technologies. In the initial stages, Slack was used to for Butterfield’s company Tiny Speck for the development of Glitch (Game). Recently, the value of Slack Stocks increased when the stock closed up at 48% at $38.62 per share.

DPO ( Direct Public Offering) today from #Slack : What You Need to Know. #IPO#StartupScaleup#Slackhttps://t.co/stJFW60DBH by @investopedia@SlackHQpic.twitter.com/kEUGnSaMjf

— Pinaki Dasgupta ,MBA ✨ (@Seanku) June 20, 2019

However, Slack is the short form of Searchable Log of All Conversation and Knowledge. It was first founded in 2009 and released in August 2013. The features of the Slack includes direct messaging, private groups, and persistent chat rooms organized by topic.

It’s a milestone day for us, but also a day of thinking about work. About ours, and yours, how grateful we are that you let us be part of your working day, and how we can continue to try and make it better. Soppy? Perhaps! But still true. https://t.co/u7g23ouufL

— Slack (@SlackHQ) June 20, 2019

Increase of Slack Stocks value

Recently, the value of Slack Stocks increased when the stock closed up at 48% at $38.62 per share. Moreover, the Slack stocks were raised as high as $42 within one day of trading. Now, the market cap of Slack has climbed above $20 billion or probably three times more in its new private estimation of $7 billion.

I’m covering the Slack direct listing today for @FortuneMagazine Follow me for more coverage! #Slackpic.twitter.com/aNIS7PfkDE

— Anne Sraders (@AnneSraders) June 20, 2019

On Thursday, Slack became the 2nd largest venture in the capital-backed business. Also the chief executive officer and co-founder of the Slack, Stewart Butterfield has now become a Billionaire. He held 8.6% of stake which is worth $1.6 billion at the opening price in the market.

Apart from that, Accel is the biggest shareholder that has a stake of $4.6 billion. Other shareholders include Andreessen Horowitz ($2.6 billion), Social Capital ($2 billion), Slack co-founder Cal Henderson ($646 million), and SoftBank ($1.4 billion).

Quick tip (as in a tip to make things quicker): You can push ideas from Slack into @asana with a few clicks. And that’s just one simple shortcut! There are plenty more. What time-saving apps and shortcuts do you use? #SlackTipshttps://t.co/4qZdT5VbGVpic.twitter.com/dpW3QKff2l

— Slack (@SlackHQ) June 18, 2019

Did Slack get any benefit from investing in SaaS?

The opening of Slack was quite grand, but not surprising. We all know that direct listing in the public market can be a risky road. However, in the case of Slack, it got benefited from both sides. It gained profit from SaaS and its globally renowned brand.

#Slack likely won’t start trading for a bit, but there’s some talk of early price indicators within the hour…Reference price is set at $26/share pic.twitter.com/M5uszrzMZy

— Anne Sraders (@AnneSraders) June 20, 2019

Apart from that, the music streaming business Spotify has also performed well since 2018. It opened trading up 25% from its cost of $132 before closing down 10%.

Check out The Geek Herald for more exciting updates.

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Here’s Who Won Big as Slack Went Public

Social Capital, a venture capital firm; it owns 50.9 million shares, equivalent to 10.1% of the company. Softbank, the Japanese conglomerate and …

After months of anticipation, Slack Technologies(NYSE:WORK) finally went public today. Shares of the fast-growing, cloud-based office-communication platform jumped in their unconventional debut, rising more than 50% in afternoon trading from the $26 reference price the company set yesterday.

Slack chose to go public through a direct listing, rather than the standard initial public offering. It’s a move that saves the company money on underwriting fees, but also forgoes the usual windfall from new investors that an IPO brings in.

Direct listings tend to be favored by companies that are confident in their cash position and their ability to turn a profit, and believe their offering will be well-received by the market. Direct public offerings don’t come with the usual “road show,” where companies pitch their stock to big investors ahead of the IPO.

Since Slack doesn’t have to pay underwriting fees or dilute its stock with additional shares sold to new investors, the move strongly favors current shareholders, including insiders and early investors. What’s more, those insiders won’t have to abide by the usual lockup period of 90 or 180 days before they can sell their shares.

It’s no wonder, then, that Slack’s shareholders are celebrating after the company’s valuation soared to roughly $24.3 billion. That’s more than triple its $7.1 billion valuation in its last funding round, last August.

A screenshot of the Slack interface

A screenshot of the Slack interface. Image source: Slack.

The big winners

In addition to insiders like CEO Stewart Butterfield, who owns 42.5 million shares (8.4% of the company), four major investors stand to reap a huge windfall from today’s public offering. They are:

  • Accel Partners, a venture capital firm; it owns 119.8 million shares, or 23.8% of the company.
  • Andreessen Horowitz, another well-known VC firm; it owns 66.5 million shares, or 13.2% of the company.
  • Social Capital, a venture capital firm; it owns 50.9 million shares, equivalent to 10.1% of the company.
  • Softbank, the Japanese conglomerate and prolific investor; its Vision Fund owns 36.6 million shares, or 7.3% of the company.

During its 15 funding rounds, Slack sold 373,372 shares outstanding of convertible preferred stock at an average price of $3.73. With the stock trading above $41 per share as of Thursday afternoon, the investors listed above saw gains of about 1,000%.

Slack said that it expected its registered shareholders to sell about 11.5 million shares on its debut day. By 2:30 p.m. EDT, more than 118 million shares had exchanged hands, indicating that day traders are moving in and out of the stock quickly, though the stock price has been relatively stable since it opened shortly after noon.

Can Slack make you rich?

It’s clear that Slack made early investors and insiders rich to the tune of more than $20 billion. But can it do the same for you?

Slack’s revenue grew 82% to $400.5 million last year, an impressive growth rate, but in the first quarter that slowed to 67%. Over the last four quarters, the company has reported $454 million in sales, giving the stock a sky-high trailing price-to-sales ratio of about 50 following its market debut. By comparison, the average stock on the S&P 500 trades at a price-to-earnings ratio of about 22, and Slack even looks dearly priced compared to other recent SaaS (software-as-a-service) IPOs like Okta, PagerDuty, and MongoDB, which trade with P/S ratios in the range of 20 and are also seeing rapid growth. In other words, investors have very high expectations for Slack, and its stock could easily tumble if growth disappoints or the company encounters unforeseen challenges.

Competition for the email disruptor is also rising, in particular from Microsoft Teams, but also from Alphabet‘s Google and Cisco Systems.

Slack has no debt and about $800 million in cash and marketable securities, which explains why the company did not seek any additional funding when it went public. However, it lost $140 million last year, and $33.3 million in the first quarter, indicating that profitability may be years away. In its risk factors, the company warned it may never achieve profitability, though this is a standard disclosure for unprofitable companies going public.

Considering that Slack’s market cap has already exceeded $20 billion, its price-to-sales valuation is one of the highest on the market, and competition is moving into the space, new investors may want to temper their expectations for Wall Street’s latest debutante.

Here’s who is getting rich from Slack’s stock market debut

In 2013, Accel led CrowdStrike’s $30 million Series B financing round. Those are huge hauls, particularly for a firm that has traditionally raised …
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Venture firm Accel is known for making one of the most lucrative start-up bets in history, parlaying an early $12.2 million investment in Facebook into a stake worth over $9 billion at the time of the company’s IPO in 2012.

Seven years later, Accel is enjoying a comparable stretch of success.

The firm is the biggest investor in Slack, owning a 23.8% stake as the messaging app hit the public market on Thursday. Based on an opening price of $38.50 on the New York Stock Exchange, Accel’s shares are worth $4.6 billion.

That’s a decade after the firm put $1.5 million into the seed round of a gaming company called Tiny Speck, which later morphed into Slack.

“As investors it is easy to get lost in the complexities of product market fit or connecting a young company to an established category,” Accel’s Andrew Braccia wrote in a blog post on Thursday. “Slack is a great reminder that the most interesting companies are often the ones whose courses aren’t easily charted. The commonalities between those companies start and end with the drive, creativity and resilience of their founders and early team members.”

The economy is booming: But are Americans’ finances healthier because of it?

Braccia, who’s a Slack board member, made similar comments in a 2015 interview with TechCrunch. He said he talked to Slack co-founder Stewart Butterfield at the time of the pivot about whether the company should return the money now that the gaming idea was clearly a flop.

“But the company we’d invested in was Tiny Speck, which produced the game,” Braccia told TechCrunch. “And the reason we invested in Tiny Speck was because we were investing in that team. I told Stewart, ‘If you want to continue to be an entrepreneur and build something, then I’m with you.’”

Butterfield is a billionaire

Slack’s direct listing comes just over a week after the IPO of security software company CrowdStrike, which counts Accel as its second-biggest shareholder, owning stock worth $2.6 billion. In 2013, Accel led CrowdStrike’s $30 million Series B financing round.

Those are huge hauls, particularly for a firm that has traditionally raised sub-billion-dollar funds, and they account for two of the biggest venture returns of 2019, a year that’s included the debuts of Uber and Lyft. Unlike those high-profile IPOs, Slack chose to go public through a direct listing, meaning the company didn’t raise fresh capital but is letting existing shareholders convert their shares into stock that can be traded.

Optimism on Wall Street: Stocks near new highs on hopes of US-China trade truce and prospect of Fed rate cuts

Accel isn’t the only Silicon Valley firm poised to get rich off Slack. Andreessen Horowitz owns 13% (worth $2.6 billion at the open) and Social Capital controls 10% ($2 billion).

Butterfield is the biggest individual shareholder, with an 8.4% stake ($1.6 billion), followed by co-founder and Chief Technology Officer Cal Henderson at 3.3% ($639 million).

The NYSE gave a reference price for Slack on Wednesday night of $26 a share. When Spotify debuted in a similar fashion last year, its reference price was $132, but the stock opened at $165.90 the following day before closing at $149.01.

Slack’s price was ultimately determined by the designated market maker, based off a calculation of a figure where buy orders could be met with sell orders.

The day in pictures

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Swimmers compete in Le Defi Monte-Cristo swimming event at the Chateau d'If, off the coast of France on June 21, 2019

Swimmers compete in Le Defi Monte-Cristo swimming event at the Chateau d’If, off the coast of France on June 21, 2019 Boris Horvat, AFP/Getty Images
German Formula One driver Sebastian Vettel of Scuderia Ferrari in action is reflected on the helmet of a marshall during the first practice session of the French Formula One Grand Prix at Paul Ricard circuit in Le Castellet, France on June 21, 2019.

German Formula One driver Sebastian Vettel of Scuderia Ferrari in action is reflected on the helmet of a marshall during the first practice session of the French Formula One Grand Prix at Paul Ricard circuit in Le Castellet, France on June 21, 2019. Valdrin Xhemaj, EPA-EFE
A gust of wind blows Pope Francis' mantle as he delivers his message during a conference on the interreligious dialogue at the Jesuits house in Naples, Italy on June 21, 2019.

A gust of wind blows Pope Francis’ mantle as he delivers his message during a conference on the interreligious dialogue at the Jesuits house in Naples, Italy on June 21, 2019. Andrew Medichini, AP
An Indian Sadhu plays a traditional musical instrument at the Kamakhya Hindu temple ahead of the Ambubachi festival in Gauhati, India on June 21, 2019.

An Indian Sadhu plays a traditional musical instrument at the Kamakhya Hindu temple ahead of the Ambubachi festival in Gauhati, India on June 21, 2019. Anupam Nath, AP
French elite acrobatic flying team "Patrouille de France" perform a flying display at the International Paris Air Show on June 21, 2019, at Le Bourget Airport, near Paris.

French elite acrobatic flying team “Patrouille de France” perform a flying display at the International Paris Air Show on June 21, 2019, at Le Bourget Airport, near Paris. Eric Piermont, AFP/Getty Images
Firecrackers explode as revelers take part in the dance of the 'Plens' during the first day of the 'La Patum' Festival on June 20, 2019 in Berga, Spain.

Firecrackers explode as revelers take part in the dance of the ‘Plens’ during the first day of the ‘La Patum’ Festival on June 20, 2019 in Berga, Spain. David Ramos, Getty Images
A protester shouts after throwing eggs at the police headquarters in Hong Kong on June 21, 2019.

A protester shouts after throwing eggs at the police headquarters in Hong Kong on June 21, 2019. Philip Fong, AFP/Getty Images
Flames and smoke emerge from the Philadelphia Energy Solutions Refining Complex in Philadelphia on June 21, 2019.

Flames and smoke emerge from the Philadelphia Energy Solutions Refining Complex in Philadelphia on June 21, 2019. Matt Rourke, AP
Sri Lankan Christians hold oil lamps as they take part in a remembrance ceremony in Colombo on June 21, 2019, two months ago after Easter Sunday bombings killed 258 people.

Sri Lankan Christians hold oil lamps as they take part in a remembrance ceremony in Colombo on June 21, 2019, two months ago after Easter Sunday bombings killed 258 people. Ishara S. Kodikara, AFP/Getty Images

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