Abstract

The announcement that the stock of the world’s largest music-streaming company, Sweden-based Spotify Technology S.A. (Spotify), was being directly listed on the New York Stock Exchange (NYSE) in April 2018 came as a surprise to market participants, but it was also viewed as a benchmark in the history of IPO listings, as the success rate in the case of direct listings was a rare phenomenon, according to stock market analysts. However, despite scepticism about the success of the process, Spotify’s stock traded on positive note on the opening day and as well on the subsequent days, marking the successful entry of the company into the stock market. The present case study provides the scope to discuss the concept of direct listing, the difference between direct listing and a traditional IPO, circumstances that favor the process of direct listing, and the risks associated with planning and executing direct listing. It also helps to unearth the issues that would help in choosing the right listing strategy for a company, especially technology companies and startups.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• The difference between a traditional IPO and direct listing.
• The circumstances that favor direct listing.
• Risks of direct listing.
• How to make a choice a between a direct listing and a traditional IPO.

Keywords

Spotify; Initial Public Offering; Direct listing; Traditional IPO; NYSE; Corporate valuation; Financing Strategy; Traditional IPO; Private equity; Convertible notes