Spotify has revolutionized the music streaming industry, and now is innovating the IPO process. There have been rumors of the company’s intentions to directly list shares of common stock on the New York Stock Exchange, and the documents have finally been revealed to confirm this.
The traditional IPO process is quite esoteric, involving significant contributions of time and capital. By listing shares directly on a public exchange, Spotify has circumvented the underwriting process, and will instead release currently authorized shares into public markets. If successful, this may open the door to smaller private companies wising to participate in public exchanges.
The company has warned potential investors that the direct listing may cause more share price volatility. The underwriting process involves careful analysis of market demand for the share, allowing the price to be set at an expected value. The lack of consistency in supply and demand may lead to an initial bumpy ride for shareholders.
You can check out their full investor prospectus here.
We are curious to see how this plays out and how the IPO process may be made more accessible and efficient.