Spotify, valued at $13 billion, to launch direct listing on NYSE: sources

Fri May 12, 2017 4:07pm EDT
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By Lauren Hirsch and Pallavi Dewan

(Reuters) - Music streaming service Spotify, most recently valued at $13 billion, will be the first major company to carry out a direct listing on the New York Stock Exchange when it goes public later this year or early next year, two sources familiar with the situation said on Friday.

The move would be the biggest test yet for the direct listing process, which for companies willing to list shares without raising capital eliminates the need for a Wall Street bank or broker to underwrite an initial public offering (IPO) along with many associated fees.

If successful, it could change the way companies approach selling shares to the public.

The Swedish technology firm is working with investment banks Morgan Stanley, Goldman Sachs Group Inc and Allen & Co to advise them on the process, the sources said.

Spotify, the New York Stock Exchange, Morgan Stanley and Goldman declined comment. Allen & Co did not immediately respond to a request for comment.

In a traditional IPO, investment bank underwriters sell new shares of a company to the public at a price they determine based on investor feedback. The underwriters leading this process are backed by an IPO syndicate, sometimes comprising more than a dozen banks, which share the responsibility of selling and allocating shares to investors.

In a direct listing, a company does not raise money by offering new shares for sale, but instead makes existing shares immediately available to the public, meaning employees and investors can buy and sell as they wish. That dispenses with the need for banks to market and sell the company's shares.

Spotify's decision to side-step underwriters could be a hit to investment banks that rely on fees from marquee listings.   Continued...

The logo of online music streaming service Spotify is reflected in an audio music CD in this February 18, 2014 illustration picture. REUTERS/Vincent Kessler/File Photo