Since its direct listing on April 26 of this year, Slack’s stock price has dropped by more than 25%. Amidst a field of floundering 2019 initial public offerings, Slack has failed to stand out.

Slack’s primary business is providing a single, streamlined platform for all business communication needs. Per their own website, the app is “a single place for messaging, tools and files” meant to help save time on any collaborative work.

The firm’s most apparent issue is that their main competitor is none other than Microsoft. According to Market Watch, Microsoft, coming off a record fiscal year and nearly 22% net profit growth, controls the “Teams” IP, fitting nearly the same niche Slack looks to fill. It offers virtually all of the same features as Slack, while boasting integration with their Microsoft Office suite, matched or better pricing on their primary offerings and an established infrastructure. 

These stark disadvantages have left many would-be investors scratching their heads as to why they should invest in Slack.

Despite reporting revenue and earnings far above expectations, Slack continues to operate at a loss and is reportedly burning through cash. While this has been common among recent large IPOs, investors looking at these new companies tend to focus on growth.

Slack projects revenue growth of 51% for the fiscal year ahead, but the stock has continued to drop with each earnings report, according to The Wall Street Journal. They reported 82% growth in the year prior, meaning that their growth is already seeing a significant decrease in pace. 

A slow down this early in the business’s public life has investors spooked, worried that this already unprofitable business could be doomed to fail.

Slack also reports relatively low userbase capitalization. While this is expected of a “freemium” app, offering lower tiers of service for free to most users, even among its paying customers Slack lacks diversification. About 600 of its 90,000-plus paying customers attribute for 40% of their revenue.

While not immediately alarming, losing any of these customers or their reduced utilization could have significant impacts on Slack’s bottom line, according to Market Watch.

Additionally, Slack is currently being investigated by at least four different law firms on whether it misled investors in prior financial statements, reported Forbes. Lawsuits, whether accurate or not, tie up more of the company’s money and resources.

As it stands, Slack remains in an infamous club of big name, loss-generating debtors. 

Along with Uber and Lyft, who have experienced similar drops in stock price since their initial offerings, investors are telling new companies that they need to prove their profitability and growth potential to earn their investment.

At the time of writing this article, Slack has most recently reported a loss of $364 million during its second fiscal quarter alongside a 37% increase in paying customers since last year, according to The New York Times. This resulted in a 15% one-day drop of its stock price.

Only time will tell whether these expenditures will pay off for the firm in the long run.