News Worms
News Worms

Spotify may bypass IPO and list directly on stock market

Spotify may bypass IPO and list directly on stock market

Spotify may also be aiming to create a more amiable relationship with the music industry due to their controversially low pay-out in royalty fees, which amount to around 0.001 cents per play (most famously causing Taylor Swift to pull her entire catalog).

However, sources have told the WSJ that Spotify is seriously considering an alternative way to become a publicly listed company rather than a conventional Initial Public Offering.

Until now, all Spotify users had access to the same music catalogue, whether they subscribed to the Premium tier or used its ad-supported free tier. Locking in a deal with at least one other major would make going public easier for the company.

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Spotify reportedly has plans to go public before the end of the year, but not in the usual manner Wall Street would expect.

Instead, Spotify is considering a direct listing without raising any new capital.

Spotify has signed a multi-year licensing deal with UMG, but respected industry analyst Mark Mulligan sees the agreement as the tip of a much larger iceberg that puts the music streaming leader in the fast-lane in its platform genre. For a company like Spotify with a valuation between $8 billion and $10 billion, avoiding those costs could save Spotify as much as $100 million, he added.

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After months of whining that exclusive music deals hurt fans, Spotify is partnering with the Universal Music Group to do, well, exactly that. Traditional IPOs tend to be a more involved process for companies and prices are set after deliberations and meetings with investors.

"Spotify must be very confident that they can raise enough interest from investors without investment banks to do that for them", said Josef Schuster, founder of IPOX Schuster, a Chicago IPO investment firm. Spotify is still negotiating with the remaining two of the "big three" music labels, Sony Music and Warner Music Group.

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