Spotify filed to go public on the New York Stock Exchange,according to a person familiar with the matter, in thehighest-profile test yet of a technique that lets companies listshares without raising money through a traditional stockoffering.

With steady cash from more than 60 million paying subscribers,the world's largest paid music-streaming service doesn't need morefunding. Instead of an initial public offering, it's trying adirect listing, which essentially lets private stakeholders starttrading their shares on a public exchange. That avoids underwritingfees and restrictions on stock sales by current owners, and doesn'tdilute the holdings of executives and investors.

Spotify, which has been valued at about $15 billion, would bethe most prominent company by far to attempt a direct listing, amethod that until now has been used by small issuers and realestate investment trusts. It would also be a first for the New YorkStock Exchange, which has sought permission from the Securities andExchange Commission to change its rules for the occasion.

Spotify sent confidential documents to the SEC in late Decemberwith the aim of listing its shares in the first quarter of thisyear, said the person familiar with the matter, who asked not to beidentified discussing private information. Axios reported thefiling earlier Wednesday.

Nonpublic filings have become more common since July, when theSEC begin letting all companies file early IPO or stock-listingregulatory documents confidentially — a perk previously reservedfor smaller businesses. The initial privacy is meant to make thelisting process more efficient and encourage more companies to gopublic. Spotify may be able to keep the documents private until atleast 15 days before the share offering is effective.

If the operation is successful, it could pave the way for otherbig tech companies, such as Airbnb and Uber, if they decide to gopublic and current investors don't want their stakes diluted.

The move has its risks. Without underwriters, Spotify shareswon't debut with a price based on investor feedback, with buyerslined up. An unusual format can also cause unforeseen problems, asGoogle discovered in its 2004 Dutch-auction IPO.

|

Music's Rebound

Investors have few opportunities to invest directly in the musicbusiness, which is in the early stages of a recovery from yearsravaged by piracy and a steep decline in CD sales. Online radioservice Pandora Media has struggled to grow in recent years, a redflag for potential investors. But unlike Pandora, Spotify haspersuaded tens of millions of people to pay a monthly fee.

Spotify is led by Daniel Ek, a Swedish entrepreneur whoco-founded the company and has since recruited a U.S.-basedleadership team. While the company is the market leader in musicstreaming, it faces growing competition from tech giants Apple,Amazon.com and Alphabet.

Spotify hired Goldman Sachs Group, Morgan Stanley and Allen& Co. last year to assess its options for a public offering.The company has already raised more than $1 billion in equity andobtained a $1 billion convertible loan from investors led by TPG inMarch 2016.

The conversion was tied to a public offering, with the termsgrowing more favorable to TPG the longer that takes. By choosing adirect listing instead, Spotify will have to reach a new agreementwith the private-equity company.

Spotify took a major step toward the public offering last yearby signing long-term licensing deals with all three major recordlabels, permitting them for the first time to keep some songsrestricted only to paying subscribers. The streaming-music provideralso settled a class-action suit last year with songwriters seekingroyalties, though some parties were unhappy with the deal and havesubsequently filed objections.

From: Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.