Music streaming giant Spotify is set to go public when the market opens on Tuesday through a direct listing on the New York Stock Exchange, eschewing the initial public offering (IPO) model that most companies pursue.
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By going public through a direct listing, Spotify isn’t relying on a investment bank to help set the initial stock price – a practice generally seen as a check against early volatility in trading – and won’t raise any new capital. As a result, Spotify will avoid the hefty fees that are typically earmarked for banks.
Instead, Spotify investors and employees holding company shares will be able to sell their stock directly to the public, without the so-called “lockup period” that generally prevents large investors from selling shares immediately after an IPO. Spotify will trade on the New York Stock Exchange under the ticker SPOT.
“Normally, companies ring bells,” Spotify CEO Daniel Ek said in a blog post on Monday. “Normally, companies spend their day doing interviews on the trading floor touting why their stock is a good investment. Normally, companies don’t pursue a direct listing. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company. As I mentioned during our Investor Day, our focus isn’t on the initial splash. Instead, we will be working on trying to build, plan, and imagine for the long term.”
The Swedish company said in pre-listing filings with the SEC that shares have sold in private transactions for as much as $132.50 per share, which would indicate a valuation of nearly $23 billion. Reuters calculations placed the company’s value at closer to $19 billion.
Spotify had 71 million paid subscribers as of Dec. 31 and 159 million monthly active users. The company said it brought in about $5 billion in revenue in 2017, up 39% year over year, and a net loss of about $1.5 billion. It has yet to turn a profit.
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Spotify’s filing to go public came a week after web-storage service DropBox filed for its IPO. Shares of that company debuted at $29 and closed above $30 on Monday.
