The Wall Street Journal wrote a story that Spotify is “seriously considering” joining the stock market without an IPO. The news was also reported by Mergermarket. The idea would be to go public without the fundraising event; instead, employees and venture capitalists would sell their shares to investors directly.
We are hearing that the plans have not been finalized, but Spotify is open to taking an unusual approach. If they opt to do the “direct listing” described by the WSJ, they would avoid paying fees to the underwriting banks and prevent further share dilution.
They could also avoid the classic “leave money on the table” scenario, where institutional investors and the other high net worth individuals who have access to IPOs reap all the benefits from the first day’s gains. Banks generally recommend that the company “pops,” by trading up 20 percent or so on the first day, but that also means the company could have sold their shares for more.
Spotify also could promote its business ahead of their debut. For IPOs, there are strict SEC rules about talking to the media in the weeks before listing on the stock market.
But the part that doesn’t seem to add up is that Spotify would be willing to…