Yesterday the Wall Street Journal broke anonymously sourced news (e.g. rumor) that Spotify is planning an “open listing” method of becoming a publicly traded company. In the ensuing media swirl, that method has been termed an IPO-less IPO.
An open listing is a straightforward, less managed (and less manipulated) way of becoming a public company, by simply placing existing shares into the investor marketplace. Unlike a managed IPO, there is no creation of additional shares, no special pricing to institutional investment houses in a pre-sale. Accordingly, the company does not receive a bucket of guaranteed cash as it transitions from private to public positioning.
Recode calls the plan “weird,” and says “it might be good for Spotify’s investors.” Citing the recent Snap IPO, Recode noted that, like most tech offerings, there was a first-day bounce in stock price — a 41% jump. That classic “pop” in share price on the first day is like money left on the table for the privileged early investors, whose pre-pop share value was 41% less than they might have realized by selling into the open market.
Recode calls the open listing concept “more democratic, very logical, very internet.”
TechCrunch looks at things from the perspective of Spotify’s bank account, and wonders why the company doesn’t want to harvest guaranteed cash in a traditional IPO — customarily a planned and managed windfall that can fund business development as the company enters the realm of public scrutiny. “It seems short-sighted and very risky,” TechCrunch quotes Barrett Daniels, CEO of Nextstep Advisory Services.
Fortune.com, in its “Term Sheet” for today, notes that the interest rate on Spotify’s debt goes up one percent every six months that it remains a private company, and speculates that the open listing method is Spotify’s quickest route to market.
this roundup of rumor and speculation provides a backdrop to what has for a couple of years seemed like an inevitable path to the Wall Street for Spotify. When that happens, however it happens, it will be fascinating to get more visibility into finances, operations, and strategies through quarterly reports. Industry observers will finally be able to compare two market leaders — Pandora and Spotify — through the common language of SEC reporting.