In Snap’s massive IPO earlier this year, rookie investors had to wait for the big guys on the street to take their cut before buying their own, pricier shares of the disappearing photo company.
But when music-streaming service Spotify goes public, investors might not have to wait. The company is reportedly preparing to go public in a very different way, with shares offered directly to the public.
Spotify is seriously considering a direct public offering, according to people with knowledge of the matter, as reported by the Wall Street Journal. It’s a less costly process for the company going public as it cuts out the underwriters and the hefty fees that come with them.
Instead of having banks determine the price of shares before the company officially opens up for trading to the public, Spotify stock price would be determined solely by supply and demand on the market. And instead of offering shares to early or institutional investors before its first day of open trading, shares in a direct public offering are generally fair game to anyone with the funds. Such offerings often come with a minimum investment threshold.
According to the people cited by the WSJ, Spotify is hoping for a valuation exceeding $10 billion. Typically, direct public offerings are used by much smaller companies.