Spotify Is Finally Having Initial Public Offering; Not An IPO Like Others

By Charisse Mae Villanueva | Apr 07, 2017 05:07 PM EDT
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Spotify decided to go 'on public' this year, and it will mean that the music-streaming company is planning to expand soon. Although the change will not happen until September this decision from Spotify will be an interesting news for investors. But Spotify will not be actually converting from private to IPO, it will use DPO instead.

According to someone who's familiar with the company's plan via Bloomberg, the initial public offering is not slated to raise money for additional capital. Selling stocks for an additional fund is the traditional reason for initial public offering or IPO, but for Spotify's case, they will not earn additional funds after commencing this plan.

Spotify's gonna use Direct Public Offering or DPO as a way of going public. According to CNBC, DPO will enable anyone to buy Spotify stocks directly from stockholders without entering the open market. Not only will it be a private transaction, but it will also mean the there will be "price underwriters" no more.

This decision will come with a good side and bad side, as of any other plans. The good side is that this can strengthen Spotify's employer-employee relationship by enabling employees to buy company stocks easily. Second, it can help the company to lift the burden of the $1Billion loan incurred two years ago. Third, Spotify can go public without the additional fees for licenses. And it also makes interference of decisions from the outside party almost impossible.

The disadvantages would be the limitation of outstanding stocks that can circulate the market. With this, the additional funds that might be collected for the company are very limited. In addition, investors will demand cheaper prices for the stocks when buying outstanding stocks as they have a riskier position in their investment.

The good sides of this decision are almost too good that taking this plan is a good decision for Spotify. But as usual for plans, there is no guarantee that things will work. More news will be available in a few more months.

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