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Spotify is planning a direct listing of its shares - not an IPO

07 April 2017

Much has been made of Spotify's imminent IPO, but a new report suggests the streaming service is instead considering a different approach - through a direct listing on a U.S. stock exchange. The rub is this: It may not really be an IPO.

While there was speculation earlier this year that Spotify's IPO may slip to 2018, going public this year remains a real possibility for the company, which has been watching the market reception for Snapchat's IPO among other indicators.

According to Spotify, the new agreement will also provide UMG with "unprecedented" access to data, which it is expected to use to develop new tools to further its engagement with music fans. The initial price is set by underwriters following extensive meetings with potential new investors.

Instead, Spotify will offer shares for a price simply based on the supply and demand of a public exchange.

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The last valuation of the company that was made public was $8.2 billion in June 2015. The 10-year-old company may list its shares on a US exchange as early as September. A direct listing would help Spotify avoid some of the fees and hassle of an IPO, and wouldn't have to dilute the existing shares of the company.

"Spotify would have an easier time going public if it had a deal with at least one of the other majors, but it could probably have a successful offering without locking in every deal first", wrote Billboard's Robert Levine in his analysis.

In a new licensing deal with Universal Music Group, Spotify will now give artists the option of restricting new albums to only paid subscribers of the music streaming service for the first two weeks of their release.

As more Silicon Valley startups eschew the expense, uncertainty and scrutiny an IPO brings, companies are choosing to stay private longer and continue padding their bank accounts with venture dollars for as long as they can.

Spotify is planning a direct listing of its shares - not an IPO