Slack will generate a ton of excitement when it lists on the New York Stock Exchange Thursday, CNBC's Jim Cramer said.
The cloud-based communications platform will forgo a traditional IPO in lieu of a direct listing, where a company lists a block of pre-existing shares on the exchange, without any underwriters. NYSE set the reference price for the direct listing at $26 per share late Wednesday.
"I'm willing to let you pay $40. ... That's well above. Now if you can get it below that, that's even better. If not, you keep your bat on your shoulder," the "Mad Money" host said. "Slack is a great story ... but we still got to be disciplined if you want to start a position in this one."
Slack is a collaboration software company and alternative to email that's popular among professionals. Cramer called it a "fresh-faced" enterprise software play with a strong growth rate.
"This is exactly the kind of stock that investors ... they can't resist it, they can't get enough of it," he said. "So I expect this one to run tomorrow."
Slack offers both free and paid subscription versions, including a higher-priced option that has additional services. The company sports 10 million daily active users and serves about 600,000 entities that have at least three users. Only about 95,000 of those organizations are using the paid product, but that includes about 60 of the Fortune 100, Cramer added.
"The numbers are the reason why I'm betting Slack will generate so much excitement," the host said.
Slack's revenue grew 82% in 2018, but slowed to 67% in its most recent quarter. Paid customers grew 42% in the same year, and it grew another 42% in the most recent quarter, Cramer said. The company also grew its client base of businesses that bring in more than $100,000 of annual revenue by 93%, he said.
"In short, Slack's overall growth is fantastic," he said. "The company's on the path to profitability. The balance sheet is fine."
Cramer pointed out that Slack has to figure out its cash flow, but that's because the company is investing more into itself. He is concerned, however, about how the communications platform will be able to convert its existing free users into paid customers. Furthermore, he said Slack's capital structure is an "unusual" one where public shareholders won't have real voting power.
"This has become increasingly common with tech, though. The unicorns do it. I hate it," Cramer said. "Because if something goes wrong, you and your fellow shareholders have no real recourse other than to dump the stock."
Another cause for caution is Slack's second quarter and full 2020 fiscal year guidance, Cramer said. The firm expects revenue growth to slow down in both measures. There's a chance that management was being conservative, he said.
At the $26 reference price, Slack would trade at 23-times 2019 sales and 15-times 2020 sales, Cramer said.
"[That's] very expensive. Nothing else in Slack's peer group comes close," he said. "Having said that, it's much cheaper than recent IPOs with rapid growth rates like CrowdStrike, like Beyond Meaty [and] like Zoom Video."
WATCH: Cramer breaks down Slack's debut to public markets
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