![]() This included terms that grow favorable to TPG the longer Spotify remains private. Last year, the music streaming company raised $1 billion in convertible debt from TPG and others. In addition, Spotify has a unique reason to seek a direct listing. All of these factors bring unpredictability to Spotify’s plans - its listing could go smoothly or it could see unusual trading volatility. It would also save on underwriting fees but could open Spotify’s shares to price volatility that underwriters work to avoid by building demand, determining the offering price, and otherwise providing deal support.įinally, direct listings come with no restrictions on when insiders can sell shares, which could add to early selling pressure if the stock performs poorly upon listing. ![]() In the first half of 2017, 12 tech companies staged IPOs.īy listing shares directly, Spotify could avoid the compliance and disclosure requirements that many larger companies would face during an IPO, although standard reporting requirements would apply once Spotify is public. In 2015, 31 tech companies went public, a figure that declined to 18 in 2016, according to Fenwick & West. ![]() Tech IPOs have been sluggish in the past year and a half, despite recurrent predictions that the pace of offerings would pick up. Many tech startups have shied away from going public to avoid underwriting and compliance costs, as well as the daily volatility that can afflict money-losing companies in the public market. In March, the NYSE asked the SEC to alter its listing standards in a way that would allow for more direct listings on the exchange - a change some are calling the “ Spotify rule.” The SEC has yet to decide on the rule change. A direct listing from Spotify would offer an interesting test case for an alternative to IPOs.
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