January 4, 2018

Spotify files paperwork for “direct listing” IPO under cover of night

Spotify files confidentially for IPO via “direct listing.” May go public as soon as this quarter.

Yesterday, sources close to the company revealed that, back in December, Spotify confidentially filed paperwork required for IPO via “direct listing,” an alternative avenue to the public market that forgoes the pomp and circumstance of traditional public offerings.

That means, unlike Snap’s IPO bonanza last year, there’ll be no “road show” leading up to the listing (where execs travel and pitch their business to analysts and potential investors) and no fees to the Wall Street underwriters that typically price shares before they start trading.

It’s a slick way to slip into the stockstream, and when they do file to go public (Axios predicts it could happen in the next 3 months), they’ll be the first major company to buck the Wall Street song and dance.

Why are they doing this? Because they can

The company is cash-flow positive with over 60m paid subscribers, so they don’t need to raise any more money.

Instead, they’re rewarding employees with an opportunity to cash out at their current private valuation and sell their shares to new investors, all while saving themselves the headache of a public market reappraisal (they’ll be valued at their most recent $13B valuation).

But, there’s buffer in streaming paradise…

Namely, a $1.6B lawsuit from Wixen Music Publishing — song manager for the likes of Tom Petty, Neil Young, Stevie Nicks and more — alleging that Spotify is using thousands of unlicensed songs from its artists.

Wixen claims that the $43m settlement Spotify offered them to end a class-action suit from a group of songwriters last May doesn’t even begin to cover it.

It’s still not certain whether this untimely suit will impact Spotify’s IPO date, but you can bet other tech companies will be holding their breath until they make the big splash.

NOTE: This article has been updated to reflect that Spotify filed preemptive paperwork for their IPO filing, and did not yet file for the IPO.

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