Spotify mulling an IPO without raising more money

08 April, 2017, 07:10 | Author: Alicia Barber
  • Image source Apple

Spotify may opt for a "direct listing", which enables existing shareholders - including the major record companies - to start selling their shares in the company on the investment market, but no new shares are issued and therefore no new mega-bucks finance is raised.

Rather than hiring bankers to serve as underwriters for a typical initial public offering, a direct listing would allow the company's original investors as well as founders such as CEO Daniel Ek and some stock-holding employees to directly sell their stakes to the public.

Other major streaming apps including Apple Music and Amazon Prime Music don't even offer a free on-demand streaming tier-their membership requires pay, unlike Spotify.

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Spotify is reportedly considering skipping out on its own IPO, in a controversial move that has left many experts scratching their heads. The story that Spotify is considering a direct listing was first reported by MergerMarket; Spotify declined to comment on the story. Earlier this week, the company announced a new deal with the Universal Music Group, paving the way for similar agreements with Sony Music and the Warner Music Group. The company, which has been valued at $8.5 billion, is under pressure to go public soon or face financial penalties under the terms of a March 2016 debt deal.

Spotify, the loss-making music streaming service, has signed a long-term licensing deal with Universal Music Group (UMG), which will put some new albums behind a temporary paywall.

"They are trying to reduce the headline rate [from which royalties are calculated], and we are looking for ways to make sure we don't lose revenue", said an industry executive with knowledge of the negotiations. This would benefit Spotify's path to profitability and an IPO. Free users will have to wait two weeks after an album's release to hear the newest tunes.

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