NEW YORK/SAN FRANCISCO: Music streaming service Spotify has filed confidentially with U.S. regulators for an initial public offering and is targeting a direct listing in the first half of 2018 that would allow some longtime investors to cash out, a source familiar with the matter said on Wednesday.
If Spotify, which was valued at as much as US$19 billion last year, goes ahead with its plans, it would be the first major company to carry out a direct listing, an unconventional way to pursue an IPO without raising new capital.
A direct listing mainly eliminates the need for a Wall Street bank or broker to underwrite an IPO along with many associated fees and could change the way companies approach selling shares to the public.
The confidential filing was initially reported by news outlet Axios.
The U.S. Securities and Exchange Commission expanded the Jumpstart Our Business Startups (JOBS) Act last year by allowing all companies, regardless of revenue, to file a draft IPO registration statement confidentially before they unveil financials publicly.
Spotify is the biggest global music streaming company and counts Apple Inc and Amazon.com Inc as its main rivals. Reuters has previously reported Spotify was aiming to file for an IPO in late 2017 and list with the New York Stock Exchange early this year.
A Spotify spokeswoman declined to comment.
Spotify was sued by Wixen Music Publishing Inc last week for allegedly using thousands of songs, including those of Tom Petty, Neil Young and The Doors, without a license and compensation to the music publisher. It was unclear how the lawsuit would impact the IPO plans.
Wixen, an exclusive licensee of songs including "Free Fallin'" by Tom Petty, "Light My Fire" by the Doors, "(Girl We Got a) Good Thing" by Weezer and works of singers such as Stevie Nicks, is seeking damages worth at least US$1.6 billion along with injunctive relief.
Spotify intends to proceed with a U.S. direct listing in the first half of 2018 despite the lawsuit, according to a source familiar with the matter. It has filed confidentially with the SEC with Goldman Sachs, Morgan Stanley and Allen & Co helping arrange it, the source added.
The company said in June it had more than 140 million active users while listing more than 30 million songs, but it is paid subscribers that count most in business terms. Spotify last reported more than 60 million paid users, twice that of Apple Music, its closest rival.
(Reporting by Greg Roumeliotis in New York and Liana B. Baker in San Francisco; additional reporting by Olof Swahnberg in Stockholm; Editing by Meredith Mazzilli)