SEC Weighting Letting Spotify Go Public Without an IPO

By:
Chris Gaetano
Published Date:
Aug 22, 2017

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The Securities and Exchange Commission is pondering whether to let streaming music service Spotify skip the IPO process entirely and just go public, according to Bloomberg. As a well-known service with an significant cashflow from its more than 60 million paid subscribers, Spotify has already fulfilled the reasons why companies generally go public in the first place: to raise capital and increase awareness. This is why it has been looking to list directly on the New York Stock Exchange, which would allow it to avoid underwriting fees and restrictions on stock sales by current owners, as well as the dilution of holdings by executives and investors, according to Bloomberg. VentureBeat also pointed out that listing directly would also allow Spotify to sidestep the compliance and disclosure requirements that normally need to go through, though it would still be bound to regular reporting requirements from then on. Bloomberg pointed out, though, that skipping the IPO process can be risky because underwriters tend to set prices based on investor feedback. 

 Bloomberg said that direct listings are very rare and have only tended to take place on the Nasdaq. If Spotify is successful in its attempts to skip the IPO process, it would be the largest company to have done so, as well as the first time it happened on the New York Stock Exchange. The Spotify case could be the new chair Jay Clayton’s attempt to test the waters and see whether more companies would go public if they could skip the IPO process, said Bloomberg, as he has previously fretted that the large number of disclosure regulations around public companies has meant more firms staying private. 

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