Spotify is discussing a plan to bypass the tradtional route to a public listing with officials at the US Securities and Exchange Commission (SEC), which is investigating the move.
The regulator wants to know more about why the world’s largest paid music streaming service, which launched in Thailand this week, wants to list directly on the New York Stock Exchange rather than conduct a traditional share sale. SEC officials have been in touch with the company since July, Bloomberg reported.
Not many companies choose to list directly. Only a few have done so on the Nasdaq Stock Market and none on the New York Stock Exchange – Spotify would be the first.
A direct listing usually means the company is not looking to raise money or create awareness, something typically achieved via an IPO, and can avoid underwriting fees and restrictions on stock sales by current owners, Bloomberg explained. It also means the holdings of executives and investors will not be diluted.
However, it brings uncertainty as during an IPO process investor feedback is taken into account and buyers are ready to purchase shares.
Spotify hired Goldman Sachs Group, Morgan Stanley and Allen & Co to evaluate its options. It already raised more than $1 billion in equity and obtained a $1 billion convertible loan from investors in March 2016, Bloomberg said.
The company recently announced the service hit 60 million paying subscribers after adding 10 million paying users between March and July.
It also boasts 100 million customers who use the service for free. In comparison, Apple Music counts 27 million subscribers in all, though the service does not offer a free option.
Spotify was valued at $8.5 billion in a funding round in 2015. While its revenue is on the rise – it made €2.9 billion ($3.4 billion) in 2016 – its net losses have widened because of rising royalty and distribution fees.
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