Coverage: Spotify files for an IPO

Music streaming service Spotify 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.

Greg Roumeliotis and Liana B. Baker of Reuters had the story:

Spotify is the biggest global music streaming company and counts Apple Inc and Amazon.com Inc as its main rivals. Reuters had previously reported Spotify was aiming to file for an IPO in late 2017 and list with the New York Stock Exchange early this year.

Spotify declined to comment.

Spotify was sued by Wixen Music Publishing Inc last week for allegedly using thousands of songs without a license and compensation to the music publisher. Wixen is seeking damages worth at least $1.6 billion.

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. Goldman Sachs, Morgan Stanley and Allen & Co are helping arrange the listing, the source added.

Aaron Mak of Slate reported what it means for musical acts:

Spotify has been embroiled in a number of battles with music publishers and musicians as of late, and the new influence of shareholders could make the company even more intransigent than it already has been. Artists have long vilified Spotify’s compensation arrangement, arguing that its per-stream rates are too low and that it willfully neglects to seek out the right licenses. The legal action from Wixen actually comes on the heels of a class action lawsuit from Melissa Ferrick and David Lowery, musicians who alleged that Spotify knowingly distributed unlicensed music and sought $150 million.

Spotify tried mulitple times to get Ferrick and Lowery’s case thrown out, but ultimately agreed to pay a $43 million settlement, likely because it wanted to resolve the suit before listing its shares, according to Rolling Stone. Hundreds of artists and publishers, including Wixen, decried the settlement as too low, which may explain the hefty $1.6 billion that Wixen is now demanding.

Once Spotify is accountable to shareholders to pay dividends, it’s hard to imagine that the company is going to relent on either the legal or streaming compensation fronts.

Dan Primack of Axios reported that Spotify’s IPO could change how some tech companies go public:

Spotify is pursuing a direct listing instead of a traditional float, causing both Silicon Valley and Wall Street to pay very close attention. If successful, it could change how some tech companies go public.

The direct listing means no road show or other typical IPO accoutrements — including some of the Wall Street fees, although several investments banks are involved. The quiet period does seem intact, however, as a Spotify spox declined comment.

All indications are that Spotify wants to list in Q1, and timing of the confidential F-1 filing would support such a calendar. But yesterday came news that the company has been sued for $1.6 billion for copyright infringement. It’s unclear how the suit will affect Spotify’s direct listing plans, outside of needing to add a new risk factor to the confidential docs.