3. Slack Technologies, Inc. (NYSE: WORK)
Value: $93,448,000
Percent of Paul Tudor Jones’ 13F Portfolio: 2.64%
Number of Hedge Fund Holders: 66
Collaboration software Slack ranks 3rd in billionaire Paul Tudor Jones’ portfolio as of the end of the fourth quarter of 2020. The billionaire’s hedge fund increased its hold in the company by 1845% in the fourth quarter, ending the period with 2.2 million shares of the company, worth $93.45 million. Last year, CRM giant Salesforce said it would buy Slack for $27.7 billion. Earlier this year, the U.S. Justice Department’s Antitrust Division requested more information from the two companies on the merger.
Pentwater Capital Management is one of the 66 hedge funds tracked by Insider Monkey having stakes in WORK at the end of the fourth quarter. The fund owns over 18.1 million shares of the company.
RV Capital, in their Q4 2020 investor letter, said that they saw a spectacular value in Slack Technologies, Inc. (NYSE: WORK) and acquired a position in the company. Here is what RV Capital has to say about Slack Technologies, Inc. in their investor letter:
“We became co-owners in Slack, a channels-based communication service for businesses. In an unexpected twist, a few months later it was acquired by Salesforce.com at roughly a 50% premium to what we had paid.
In accordance with my usual practice, I was planning on writing about our investment in Slack. By laying out my investment hypothesis at the onset of an investment, I hope to enable investors to assess in hindsight whether it worked (or not) because of a plausible investment philosophy consistently applied. Given that Slack has effectively already played out as an investment, this rationale has gone. After all, anyone can make a successful investment decision look smart after the fact.
There is one element of my Slack investment thesis that I would like to lay out as it neatly illustrates an idea in my first-half letter and has not yet played out. I wrote then that I wanted to invest more in “early-stage, listed companies”. What I meant by this are companies whose moat is not yet fully developed, but not so undeveloped that it is difficult to say if they will ever have one. I described early-stage companies as possessing:
The kernel of an idea (however unformed), which – if you squint – you can imagine creating a new paradigm in decades to come.
Slack was the type of company I had in mind when I wrote this. Its moat in its core business of providing channels-based communication within companies is well developed. It benefits from a network effect (the more employees on Slack, the higher the value they derive from it), a broad developer ecosystem (thousands of integrations have been built for Slack) and switching costs (Slack becomes tightly interwoven into a company’s workflow through said integrations).
What really got me excited – the new paradigm – is “Slack Connect”. Connect is a feature that allows companies to extend Slack beyond their own organisation to external partners. Connect has not yet achieved viral growth – the moat is not yet developed.”
