Spotify’s IPO could be a non-IPO
By Chris Cooke | Published on Friday 7 April 2017
Assuming the other big rights owners now follow Universal Music’s lead and sign up to new multi-year licensing deals with Spotify, all eyes will then be on the streaming music company’s long anticipated IPO on Wall Street. Though that might not go quite as had been expected, according to sources who have spoken to the Wall Street Journal.
As previously reported, the costs of servicing a round of debt financing taken on by the digital firm last year become more expensive the longer Spotify waits to list on a stock exchange, which is why an IPO is expected next year at the latest. The new licensing deals with the record industry were widely seen as the main delay in getting the flotation under way.
However, sources have told the WSJ that Spotify is seriously considering an alternative way to become a publicly listed company rather than a conventional Initial Public Offering. Spotify may opt for a ‘direct listing’, which enables existing shareholders – including the major record companies – to start selling their shares in the company on the investment market, but no new shares are issued and therefore no new mega-bucks finance is raised.
Although the direct listing approach is unusual, it does have some advantages for companies which want a public listing for one reason or another – maybe it has obligations to money lenders or investors eager to sell out on the open market – but which doesn’t actually need to raise a big new pile of cash.
A direct listing doesn’t dilute the shareholdings of or put limitations on existing investors, and removes some of the risks associated with a traditional initial public offering. Though it does land Spotify with the extra scrutiny of being a publically listed company without providing a nice big cash boost at the outset.
Needless to say, Spotify hasn’t commented on the latest gossip about its IPO, or non-IPO.