What's going on?
Spotify is poised to receive approval from the American regulator to list its stock directly on the New York Stock Exchange (NYSE) next year, according to a report from The Wall Street Journal on Thursday. That would be a pretty unconventional move…
What does this mean?
An Initial Public Offering (IPO) is a way for companies to raise money by selling shares on public stock exchanges. Companies typically use investment banks to organize and support their IPO: the banks help find buyers for the company’s shares at a certain price and often agree to swoop in themselves and buy up shares at that price if there’s not enough demand.
However, cash-rich Spotify doesn’t seem all that interested in this IPO model. Instead, it wants to list its shares directly on the NYSE – cutting out the banker middlemen altogether (tweet this).
Why should I care?
The bigger picture: Other companies might adopt Spotify’s “no-banker” model.
One obvious advantage of Spotify’s bankerless IPO is that it avoids paying their fees while retaining some benefits of “going public” (like having listed shares with which to pay for acquisitions). Spotify has plenty of cash, as well as robust access to debt markets – it doesn’t need to raise money just this minute by selling its shares. Other cash-rich private companies like Airbnb may be looking at a similar approach (not everyone is convinced, however).
For markets: 2018 could be a big year for IPOs.
The big-ticket IPOs of 2017 — Snap Inc. and Blue Apron — have proven a disappointment for investors who bought up the stock, although there have been a few dark horses that played out well. Looking ahead to next year, there are some exciting candidates in China’s Xiaomi and Airbnb – and the strong rise in stock markets this year could mean investors will have a stronger appetite for IPOs in 2018.