Today Spotify (SPOT) delivers a direct listing on the NYSE by closing trading at $150 per share, above its reference price of $132. A direct listing is highly unusual process that does not involve the normal process of using one or more brokers to run and underwrite the IPO. The shares offered of sale are from the existing pool in a secondary offering and so no new funds are raised for the company. Typically an IPO is used to raise fresh funds for the company and existing investors are locked up for a period to prevent the market being flooded with secondary shares.
In effect, shareholders have established a market price for the shares without the cost of an IPO (typically 7% of funds raised) and without having to offer a discount and without suffering the IPO dilution. For a well funded company this is a very attractive process for giving existing shareholders a valuation point and over time, liquidity. As tech companies remain private for longer and progress further through the growth process we are likely to see many more direct listings on US exchanges. Again this demonstrates that value creation is now being delivered in the private market with the public market being used primarily for liquidity for existing shareholders.
You can find the Spotify investor pitch here – Investor Day – and the Prospectus here and an article published on Forbes here. Spotify is of course a European company.
Google was the last company with its Dutch Auction process back in 2004 to buck the normal IPO process