• Direct-listing plan is said to draw scrutiny from regulators
  • New York Stock Exchange rule-change proposal still pending

Spotify Ltd. executives have met with U.S. regulators scrutinizing the music company’s plan to skip a traditional share sale and list directly on the New York Stock Exchange, according to people with knowledge of the matter.

Senior Spotify executives met with U.S. Securities and Exchange Commission officials last month, said the people, who asked not to be identified discussing private meetings. Regulators asked for the meeting to get details on the plan by the world’s largest paid music streaming service to do an end-run around an initial public offering — the conventional route to listing shares. The company has remained in touch with SEC officials since the meeting, the people said.

Spotify aims to list late this year or early next on the New York Stock Exchange. With a stream of cash from its more than 60 million paying subscribers and awareness among investors, the company isn’t seeking to raise money or make itself known to potential stockholders — key IPO objectives. A direct listing also avoids underwriting fees and restrictions on stock sales by current owners, and doesn’t dilute the holdings of executives and investors.

It also introduces uncertainty, since underwriters in a typical IPO set a price based on investor feedback and have buyers lined up. Even then, some new issues crater. Just a handful of companies have done direct listings over the past decade on the Nasdaq Stock Market. Spotify would be the biggest, and the first for the New York Stock Exchange.

While standard share sales can move quickly through approval, it’s common for SEC staff to spend more time examining offerings that involve new types of structures or products. It’s possible regulators simply want a better understanding of how Spotify’s listing will work. The agency declined to comment.

The company’s plan poses an early test for how far SEC Chairman Jay Clayton is willing to go to boost new U.S. listings.

The agency has been weighing a proposed rule change at the New York Stock Exchange that would allow…