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SEC reviewing Spotify plan to go public: report
The Securities and Exchange Commission (SEC) has reportedly met with Spotify to scrutinize the music streaming service's plan to skip an initial public offering (IPO) and directly list its shares on the New York Stock Exchange.
Senior Spotify executives sat down with SEC officials last month to provide more details on their plan to ditch the normal IPO process, sources told Bloomberg on Monday. Executives have kept in touch with the SEC about their plans.
The company intends to go public this year or early next year, according to reports.
Going public by listing stocks directly on a stock exchange and selling to the public is rare. Generally in the IPO process, companies use an investment bank to sell their shares to other banks or large investors to raise money. The investors who fund the IPO later sell their shares to the public.
Direct listings are considered riskier, but Spotify believes its wide name recognition and strong brand could allay any concerns.
A few companies have done direct listings on NASDAQ. Spotify would be the first direct listing on the New York Stock Exchange (NYSE).
According to the report, the SEC is currently considering a rule change that would allow the listing on the NYSE.
The agency also scrutinized Google's bid to go public in 2004, when the company used an unconventional Dutch-auction for its IPO.
If successful, Spotify's direct listing would keep current owners from having to sell their shares and not dilute the holdings of company executives.
Though Spotify's proposed method is unique, large technology companies like Google, Facebook and Snapchat have experimented with different offerings that allow owners and executives to keep control of their companies.