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Slack Stock Is in Freefall—Could It Be Acquired?

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At 11:33 AM EDT today, Slack (WORK) stock was trading down 5.9% at $21.83. Slack stock has been on a downturn for a while. In September so far, WORK stock has lost 23.2% and is down 43.3% over its debut price.

Slack shrugged off the traditional IPO route and bankers to go public directly. On day one, Slack stock opened at $38.50, almost 50% higher than the $26 reference price set by the NYSE. This month, Slack stock closed below that price—and the slide continues.

While Slack stock is falling today, the broader S&P 500 Index has partially recovered from yesterday’s fall after political uncertainty, trade war worries, and dismal consumer confidence data. The tech-focused Nasdaq was up marginally at 11:52 AM EDT.

Slack stock: Freefall and potential acquisition

In 2016, Microsoft (MSFT) considered buying Slack for $8 billion but opted to focus on Skype instead. Within months of shelving the Slack buyout plans, the tech titan launched Microsoft Teams, a competing product.

At Slack stock’s current price, the company’s market capitalization stands at around $12 billion, not far from the price tag Microsoft considered in 2016. During this time, Slack has grown considerably in terms of users and revenues. The substantial fall in Slack’s stock price and further downside may make it a target for acquisition.

The competitive landscape

Among Slack’s competitors, Microsoft already has Teams and Facebook (FB) has Workplace. This July, Microsoft said that Teams had achieved 13 million daily active users. Slack had 10 million daily active users at the end of January.

Considering Slack’s faltering growth, Microsoft Teams seems to have beaten Slack at its own game. Because Microsoft is already pushing ahead with Microsoft Teams, it may not be interested in buying Slack out. Notably, Slack still carries a 20x fiscal 2020 (ending in January) revenue-multiple price tag.

Facebook is also taking Workplace seriously, as it recently revamped Workplace to make it look less like Slack. Facebook’s acquisition pace has slowed amid regulatory pressure and calls for breaking the social media giant into pieces. Facebook is also focusing on Libra, its cryptocurrency project. So, Slack may not be on Facebook’s radar.

What about Google?

After a cursory look, Slack seems to have a lot of synergies with Google (GOOG)(GOOGL). Slack has a partnership with Google for integrating Google Suite, and Slack is a favorite among startups and freelancers. Interestingly, Slack started with a mission to kill email, and Google’s Gmail is the world’s most popular email service.

Although Google has Hangouts to compete with Slack, it lacks Slack’s versatility and third-party integrations. In our view, having Slack in its product portfolio may give Google serious firepower in enterprise messaging.  Having a formidable enterprise messaging platform in its toolbox could also help Google cross-sell its other products.

Could Apple consider buying Slack?

Apple (AAPL) has been shifting its focus from products to services. Apple is also trying to increase its enterprise revenues. With that in mind, Slack could be a good addition to Apple’s product portfolio. Apple is also sitting on a huge pile of cash. As of June 30, Apple had $94 billion in cash, cash equivalents, and marketable securities.

In the past, Apple has faced scrutiny for not reinvesting or returning its cash. We believe that Apple wouldn’t mind doing a synergic acquisition at the right price, and Slack could fit into this plan if its stock continues to slide.

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