As has long been speculated, Spotify is all geared up to launch its IPO. The music streaming service provider confidentially filed with U.S. regulators for an initial public offering. The company targets a direct listing in the first half of 2018, allowing some long time investors to cash out.
Spotify sent confidential documents to the U.S. Securities and Exchange Commission (SEC) in late December with the aim of listing its shares in the first quarter of this year, according to one person familiar with the situation, who asked to remain anonymous due to discussions involving private information. Axios reported the filing earlier last week.
Valued at approximately $19 billion, if Spotify moves forward with its IPO, it would become the first major company to carry out a direct listing.
An unconventional way to pursue an IPO without raising new capital, direct listing eliminates the need for a Wall Street bank or broker to underwrite the IPO along with many associated fees. It essentially enables private stakeholders to start trading their shares on the public exchange. 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.
In addition to that, the U.S. Securities and Exchange Commission (SEC) now allows all companies, regardless of revenue, to file a draft IPO registration statement confidentially before they unveil their financials.
With steady cashflow from more than 60 million paying subscribers, it is quite safe to say that the world’s largest paid music-streaming service isn’t in need of any more funding. This explains why, instead of a conventional initial public offering, it is aiming for a direct listing.
If the Spotify IPO is successful, we could expect other big tech companies such as Airbnb and Uber to also attempt a direct listing and go public.
Spotify declined a request for comment.