Industry

Spotify could go public in an unusual way

Spotify could go public in an unusual way”

A direct listing could also sidestep a surge in first-day trading that usually takes place after an IPO, which can signal that a company undervalued its newly issued shares.

Spotify, a rival to Apple Music, has yet to report a profit as it expands, but is under pressure from some artists who have boycotted the usually free service and needs to show investors it can generate cash as it considers a U.S. listing.

With a typical initial public offering investors buy shares from the company prior to IPO.

"Spotify must be very confident that they can raise enough interest from investors without investment banks to do that for them", said Josef Schuster, founder of IPOX Schuster, a Chicago IPO investment firm. Spotify, which has raised more than $1 billion in equity, was last valued privately at $8.5 billion in June 2015.

If Spotify's direct listing is successful, it could set the stage for other high-value tech companies to follow a similar path.

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The Swedish music streaming company is "seriously considering" something called a direct listing, which would make Spotify stock available on the public market immediately - bypassing the standard IPO process, according to The Wall Street Journal, which cited anonymous people familiar with the matter.

After two years of on-and-off negotiations, Spotify Ltd and the world's biggest record company have finally agreed to a licensing deal that paves the way for Spotify to go public and gives the music industry more flexibility in how new albums are streamed.

Contacted by AFP, Spotify refused to comment on the report. And as of now, the service has only reached this "windowing" deal with Universal Music Group and not Sony, Warner or EMI.

Spotify has yet to report a profit, partly because the vast majority of its sales go to the record labels and other rights holders of the songs in its library.



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