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The Wall Street Journal wrote a story\u00a0that Spotify is \u201cseriously considering<\/a>\u201d joining the stock market without an IPO. The news was also reported by Mergermarket<\/a>. The idea would be to go public without the fundraising event, instead employees and venture capitalists\u00a0would sell their shares to investors directly.<\/p>\n We are hearing that the plans have not been finalized, but Spotify is open to taking an unusual\u00a0approach.\u00a0If they opt to do the\u00a0\u201cdirect listing\u201d described by the WSJ, they would avoid\u00a0paying fees to the underwriting banks and prevent further share dilution.<\/p>\n They could also avoid the classic \u201cleave money on the table\u201d scenario, where institutional investors and the other high net worth individuals who have access to IPOs reap all the benefits from the first day\u2019s gains. Banks generally recommend that the company \u201cpops,\u201d by trading up 20% or so on the first day, but that also means the\u00a0company\u00a0could have sold their shares for more.<\/p>\n Spotify could\u00a0also 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.<\/p>\n But the part that doesn\u2019t seem to add up is that Spotify would be willing to forgo the hundreds of millions of dollars they would likely raise in an IPO. It would certainly offset the bankers fees and would give them more cash to grow their business and pay down their debts.<\/a><\/p>\n \u201cIt seems short-sighted and very risky,\u201d said Barrett Daniels, CEO and managing partner at Nextstep Advisory Services. \u201cDon\u2019t they want money?\u201d<\/p>\n When Spotify\u00a0took on significant debt a year ago, the hope was that they would be ready to go public by now, in order to avoid\u00a0paying too much interest. There were also other clauses in the agreement<\/a> which made waiting too long to go public prohibitive.<\/p>\n In February, we\u00a0reported on Spotify\u2019s difficult financial position and that the company is trying to improve its business model ahead of going public.\u00a0<\/a>At the time, Spotify was weighing a plan to delay its IPO in 2018.<\/p>\n But the success of Snap\u2019s debut and other recent IPOs means that the \u201cwindow\u201d is now open,\u00a0with more and more companies braving the public markets because of warm investor reception. This week we saw\u00a0Elevate Credit and Okta list and next week we have Yext.<\/p>\n Spotify, which raised venture funding at an $8.5 billion valuation\u00a0<\/a>has some pressure to exceed or at least meet this with its public market cap. It has big name investors including Accel Partners, Kleiner Perkins, TCV and Founders Fund.<\/p>\n Goldman Sachs is also on the list. While the investment arm is separate than the banking team, they company would likely be unhappy about Spotify circumventing the process and avoiding an IPO.<\/p>\n Spotify is not the only large private tech company that has seemed reluctant go through with an IPO. Uber has\u00a0always been reluctant to commit to this outcome.<\/p>\n Featured Image: Thomas Trutschel\/Photothek\/Getty Images<\/small><\/p>\n","protected":false},"excerpt":{"rendered":"![\"\"](\"https:\/\/tctechcrunch2011.files.wordpress.com\/2017\/03\/gettyimages-506028296.jpg?w=680\")
The Wall Street Journal wrote a story\u00a0that 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\u00a0would sell their shares to investors directly. We are hearing that the plans have not been finalized, but Spotify… Read More<\/a><\/p>\n\n<\/img><\/a>
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