Music streaming giant Spotify today filed for a $1 billion IPO (actually a DPO), although that figure is a placeholder that will likely change.

 

Spotify is a music, podcast, and video streaming service that was officially launched on 7 October 2008. It is developed by startup Spotify AB in Stockholm, Sweden. It provides DRM–protected content from record labels and media companies. (Source: Wikipedia )

 

Why Spotify’s IPO matters to you: Spotify plans to utilize a direct listing instead of a traditional float, which explains why no banks are listed as underwriters. This is known as a DPO (direct public offering) If successful, it could change how well-known tech companies go public. The European startup will trade on the New York Stock Exchange under ticker “SPOT.”

Per the F-1 document:

As this listing is taking place via a novel process that is not an underwritten initial public offering, there will be no book building process. Which means there’s no price at which underwriters initially sold shares to the public to help inform efficient price discovery with respect to the opening trades on the NYSE.
This lack of an initial public offering price could impact the range of buy and sell orders collected by the NYSE from various broker-dealers. Consequently, the public price of our ordinary shares may be more volatile than in an underwritten initial public offering and could, upon listing on the NYSE, decline significantly and rapidly.

Pay particular notice to that last part about possible price volatility, particularly as Tencent is the only shareholder restricted from selling shares once Spotify lists.

The unprofitable company reports nearly $5 billion in revenue for 2017, compared to $2.95 billion in 2016. It lost around $1.46 billion in 2017, and had $582 million of cash available at year-end. Given that this is a direct listing from existing shareholders, Spotify itself won’t generate proceeds for its own coffers.

 

According to the filing with the SEC, in 2018 the company’s shares recently traded for as high as $132.50 on private markets.

Spotify is the 2nd big tech company that has filed for an IPO recently, the other being Dropbox which filed five days ago. The Stockholm-based service has 71 million paid subscribers (over half of their total subscriber base) and millions more listeners but has yet to turn a profit.

 

What are your thoughts on the Spotify IPO? Will you be investing?