The Spotify IPO is coming…but it may not be an IPO after all

Spotify is widely expected to go public this year, but a new report suggests that may not mean pricing an IPO in the traditional sense.

The Swedish music streaming company is “seriously considering” something called a direct listing, which would make Spotify stock available on the public market immediately — bypassing the standard IPO process, according to The Wall Street Journal, which cited anonymous people familiar with the matter. That means the deal price wouldn’t be set by underwriters, and institutional investors wouldn’t buy Spotify’s shares the night before they start trading on the public market.

The listing would be a departure from the norm — only a few large companies, including Freddie Mac, have gone public in a similar fashion, the Journal reports. And there are pros and cons to such a move. Spotify would raise no additional capital, and the price of its shares would be set organically by supply and demand — meaning it could be more volatile. At the same time, Spotify wouldn’t have to pay massive underwriting fees.

Spotify, worth $8.5 billion as a private company, has been rumored to be seeking an IPO for some time. The company is hoping for a public valuation of more than $10 billion and could go public by September, according to The Wall Street Journal.

Last year Bloomberg reported Spotify intended to go public in the second half of 2017. But the report questioned whether the money-losing company could even live up to its $8 billion private valuation.

As more Silicon Valley startups eschew the expense, uncertainty and scrutiny an IPO brings, companies are choosing to stay private longer and continue padding their bank accounts with venture dollars for as long as they can. But if Spotify pulls of a successful IPO that isn’t an IPO, perhaps more local companies will follow in its footsteps.

Photo: Daniel Ek, CEO and Founder of Spotify, speaks at a media event announcing updates to the music streaming application Spotify on May 20, 2015 in New York City. (Photo by Andrew Burton/Getty Images)

 

 

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