This article was originally published on ETFTrends.com.
Spotify (SPOT) made an unconventional public debut on Tuesday as the streaming music service began trading after a direct listing on the New York Stock Exchange.
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While Spotify has some bank advisors, a direct listing allows it to trade on an exchange without all the regulatory hassles and expensive bankers that are the hallmarks of the traditional IPO.
Market conditions are already not ideal for a public debut, whether a traditional IPO or not. Usually, the banker's role is to recruit investors and push the stock to a successful debut, including buying shares to stabilize the first few days of trading and without that security, the stocks could be more volatile.
Spotify disclosed in a securities filing for the offering, "There could be greater volatility in the public price of our ordinary shares during the period immediately following the listing. Such differences from an underwritten initial public offering could result in a volatile market price for our ordinary shares and uncertain trading volume and may adversely affect your ability to sell your ordinary shares." The Dow Jones industrial average and the S&P 500 were down nearly 3 percent on Monday, and the tech-heavy Nasdaq had erased its gains for the year.Stocks got slammed on Tuesday with tech stocks dragging in the market as Amazon (AMZN) dropped 5% and was again in the headlines following a tweet from President Donald Trump.
However, according to CNBC, "There isn't any guarantee that a traditional IPO will go smoothly. Facebook's much-hyped debut in 2012 inspired a wave of lawsuits after a technical error by Nasdaq bungled the first hours of trading. Snapshares also got off to a rocky start last year. But Dropbox's IPO last month went well.
According to Yahoo Finance, "Shares of the company traded hands for as much as $131 per share during the first quarter, and the Financial Times reported Monday that will likely take until midday on Tuesday for the stock to open for trading."
Founder and CEO Daniel Ek says the listing isn't supposed to be the most important day for the company. "Our focus isn't on the initial splash," he said in a letter on the company website the day before.The so-called founder's letter has become a staple of tech IPOs, pioneered by the likes of Google, Facebook and Twitter.
The text of his letter follows in full:
Tomorrow, Spotify becomes a listed public company on the New York Stock Exchange. And it feels like the right time to pause and acknowledge the thousands of Spotify employees around the globe who helped build out the Spotify ecosystem while staying true to who we are and what we believe. You make me proud to come in and learn and work alongside all of you.
Lots of people have asked me how I feel about tomorrow’s listing. Of course, I am proud of what we’ve built over the last decade. But what’s even more important to me is that tomorrow does not become the most important day for Spotify.
It’s the day after, and the following day that matters — and all those days to come. Because that’s when we will continue the hard and important work of our mission: To unlock the potential of human creativity — by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it.
Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years. So while tomorrow puts us on a bigger stage, it doesn’t change who we are, what we are about, or how we operate.
This is why we are doing things a little differently.
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. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company. As I mentioned during our Investor Day, our focus isn’t on the initial splash. Instead, we will be working on trying to build, plan, and imagine for the long term.
Sometimes we succeed, sometimes we stumble. The constant is that we believe we are still early in our journey and we have room to learn and grow.
I have no doubt that there will be ups and downs as we continue to innovate and establish new capabilities. Nothing ever happens in a straight line — the past ten years have certainly taught me that. My job is to ensure that we keep our foot on the pedal during the ups, so that we don’t become complacent, and that we continue to stay the course with a firm grip on the wheel during the downs.
We have a lot to do — we are only in the second inning — and I’m more excited than ever for the future.
Remember, tomorrow is just another day in our journey to fulfill our mission.
Harder, better, faster, stronger.
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