SEC is looking into Slack’s direct listing and other tech unicorn IPOs

The review focuses on the first trading day.

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The Securities and Exchange Commission is suspicious of several large tech direct listings and IPOs on the New York Stock Exchange. An investigation was recently launched into the first day of trading for the listing of Slack Technologies Inc. and several other companies, according to The Wall Street Journal.

Floor brokers alerted the NYSE on the day of Slack’s listing. They suspected the designated market maker (DMM) Citadel Securities might be playing favorites with mutual funds and investors before opening the stock to the public.

Why did this raise eyebrows? — Direct listings are rarer than traditional IPOs and require both a DMM and financial adviser. Slack’s advisers Morgan Stanley, Goldman Sachs Group Inc., and Allen & Co. were meant to work with Citadel Securities to open the stock fairly.

Floor brokers at the NYSE have long remained skeptical of indications (price ranges for the stock released the morning of its listing) from DMMs running low and the actual opening of the stock taking too long. They argue that during this time, banks get to give more accurate indications to a selection of investors and potentially poach clients from other brokers with this information.

"The direct listing of slack was a tremendous success for the company, its shareholders and our nation's capital markets,” a Citadel Securities spokesperson told Business Insider and WSJ, verbatim. “From our vantage point, we stand firmly behind the integrity and transparency of the listing and pricing process on this important transaction."

Business Insider reports that the SEC will be looking into IPOs and direct listings from the past five years, but Slack is the only company publicly named so far.