Spotify May Skip an IPO and Go Straight For a Direct Listing
The tech market are in a state of transition with 2018 on the horizon. After Snapchat hit some roadblocks following their IPO, Spotify may be looking to go in a different direction with a direct listing.
The Wall Street Journal reported that earlier this week Spotify has plans to gain permission from the Securities and Exchange Commission to go forward with a direct listing. This would allow the company to transfer its shares to an exchange without raising money within a traditional IPO.
Nasdaq provided insight on the investment strategy taking place at Spotify.
‘And last year, the company raised $1 billion in convertible debt on the promise that its new investors will receive a 30% discount on shares when it files for an IPO. Spotify will have to pay 5% annual interest on the debt, however, and 1% more every six months, up to a total of 10%, until it goes public.
This decision to raise money through convertible debt was a smart move, as Spotify was able to maintain its high valuation without diluting its existing shareholders. It suggested the company was seriously thinking about an IPO, since the latest round of funding encourages Spotify to go public sooner rather than later.’
At the midpoint of 2017 Neilson reported that streaming music was up over 60% in comparison to the first half of 2016. This increase has many investors looking to capitalize on this trend.
Universal Music Group recently inked deals with Facebook and YouTube for use of their music. In addition, YouTube has also recently worked out a deal with Warner Music Group this past May. Spotify currently has the lead for most paid subscribers within streaming music, but they will face intense competition moving forward in 2018.
“Underwriter-less” IPO for Spotify is coming: Trading, yes, but no new shares, no bankers https://t.co/O9uVH6s7Sk
— The Wall Street Journal (@WSJ) December 21, 2017