Spotify prepares to go public, chooses direct listing over traditional IPO

Music streaming company Spotify is set to start trading on the New York Stock Exchange later in the day. In an unprecedented move for a major tech company, Spotify opted for a direct listing instead of an initial public offering (IPO).

“The listing of our ordinary shares on the NYSE without underwriters is a novel method for commencing public trading in our ordinary shares, and consequently, the trading volume and price of our ordinary shares may be more volatile than if our ordinary shares were initially listed in connection with an underwritten initial public offering,” the company said in its filing with the United States Securities and Exchange Commission.

A direct listing means the price of shares will be determined once the session starts and will depend on the number of shares existing shareholders want to sell and the buyers’ demand for them, instead of offering a pre-determined number of shares to underwriters before the opening bell as is the case in a traditional IPO. Despite not having traditional underwriters, Spotify hired Citadel Securities and Morgan Stanley to set the company’s opening price at the NYSE.


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