The Securities and Exchange Commission is investigating the first-day trading activities of workplace-focused instant messaging company Slack (WORK) – Get Report and other “unicorn” companies that listed their shares directly on the New York Stock Exchange in a probe on whether the trading followed the rules.
The Wall Street Journal reported that SEC enforcement staff have sent letters to several companies, including one seeking information from electronic-trading firm Citadel Securities, related to how it opened Slack’s stock for trading on June 20 in the company’s so-called direct listing.
People familiar with the matter told the Journal that regulators have asked Citadel Securities for messages such as emails sent just before the stocks opened for trading, as well as its policies for complying with NYSE rules. GTS, another trading firm, received a similar request, the Journal said.
According to the Journal, trading data showed that at 10:18 a.m. ET on June 20, Citadel Securities indicated that Slack would open between $30 and $34. Roughly 30 minutes later, the firm adjusted its indication to a range of $32 to $34.
Following a half-dozen more adjustments, the stock opened at $38.50, in a giant trade shortly after noon that day in which $1.75 billion worth of Slack shares changed hands.
The stock ended the trading day Friday at $21.51.
What other companies the SEC may be looking at could not be confirmed by the Journal, though Spotify (SPOT) – Get Report also went the direct-listing route when it went public.
In both the Spotify and Slack deals, Morgan Stanley and Goldman Sachs acted as financial advisers, while Citadel was the designated market-maker, or DMM – the intermediary in charge of putting buyers and sellers together directly.
The SEC also is reportedly probing several other IPOs of so-called unicorns, companies known for achieving high valuations while private, done over the past several years, the Journal said. Companies that have gone public on the NYSE in recent years include Alibaba Group (BABA) – Get Report , Snap (SNAP) – Get Report and Uber (UBER) – Get Report.
