Spotify’s direct listing is an inflection point in the Wall Street-Silicon Valley relationship
Tuesday will be an abnormal day in the history of the IPO.
“Normally, companies ring bells. Normally, companies spend their day doing interviews on the trading floor touting why their stock is a good investment. Normally, companies don’t pursue a direct listing,” Spotify’s CEO, Daniel Ek, said on Monday in a blog post titled, “Tomorrow.”
“While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company.”
On Tuesday, Ek’s Spotify will pioneer a new way for companies to go public, volunteering itself as a guinea pig for the venture-backed economy by eschewing the traditional help of investment bankers. Rather than selling shares to institutional investors in advance of the first day of trading — as is normally done in an IPO — Spotify isn’t selling any new shares, and is instead allowing its existing shareholders to directly offer their holdings to the market.
Here’s why that matters — even if you don’t care about Spotify: If the direct listing is successful, then the push-and-pull power struggle between Silicon Valley and Wall Street would shift more toward the former. More and more highly-valued startups could think that they, too, do not need Wall Street’s usual fare in order to become a public company, and investment bankers could have a tougher time pitching their services to CEOs.
Starry-eyed entrepreneurs and deal-chasing bankers are cut from culturally different cloths, but they’ve needed each other for decades: Founders need the wisdom of bankers to turn their private companies into public behemoths; bankers need the consistent revenue stream. It’s a professional alliance that has worked, and that’s probably why there hasn’t been that much innovation in the IPO process despite the tech sector’s love of disrupting the old business model.
So, what if founders are no longer dependent on bankers’ full suite of services to go public? That’s what Spotify is testing.
Read More- Recode |
