Spotify Keeps Adding To Their List Of Enemies

&l;p&g;&l;img class=&q;dam-image bloomberg size-large wp-image-39120428&q; src=&q;×0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; A Spotify Ltd. logo sits on display as employees work at desktop computers inside the music streaming company&s;s offices in Berlin, Germany. Photographer: Krisztian Bocsi/Bloomberg

It&s;s not easy to be a disruptive tech company these days.

Unicorns like Uber, AirBnB and Snapchat have all run into their fair share of lawsuits, growing pains and negative news stories over the past year.&a;nbsp;Now, the music streaming service&a;nbsp;Spotify has raised some eyebrows in the investment world with word of a confidential filing with the SEC to directly list shares of its IPO on the NYSE.

It&s;s a risky and rare move.&a;nbsp;&q;&l;span&g;Nasdaq has been the go-to exchange for direct listings by private companies for the past decade, completing about a half-dozen since 2006 while the NYSE has had none, according to the two exchanges,&q;&a;nbsp;&l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;wrote&a;nbsp;the Wall Street Journal.&l;/a&g;&a;nbsp;NYSE has been trying to pursue&a;nbsp;tech unicorns (companies with a valuation over $1 billion)&a;nbsp;and &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;has recently applied to the SEC&l;/a&g; to make it easier for companies to list directly on their exchange.&l;/span&g;

Why would Spotify want to list directly? With it&s;s most recent valuation &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;somewhere near $20 billion&l;/a&g;, Spotify would save tens of millions in&a;nbsp;fees normally paid to investment banks to &q;road show&q; their IPO and come up with an appropriate price to list on the exchange. Spotify&s;s current investors would also not be subject to the standard lock-up time of a few months post-IPO, so they can cash out as soon as the company goes public.

The risky part is that, should public demand not be as expected, the underwriters usually are committed to buying shares if no one else will. Without a standard road show to shop the IPO around to other banks, it will be hard to know at what price Spotify should&a;nbsp;be listed when it opens to the public.

This move might make some enemies among investment banks (and their analysts), who stand to lose out on their share of the enormous underwriting fees they&s;re accustomed to receiving for bringing a company public. If Spotify&s;s unconventional direct listing is a success, tech companies thinking about an IPO (like Uber or AirBnB) may follow suit. The&a;nbsp;bottom line of many investment banks could suffer as their underwriting fees dry up.

This all comes amid a &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;$1.6 billion lawsuit filed by Wixen Music Publishing&l;/a&g; last week, alleging that Spotify does not have proper licensing rights and is not paying appropriate&a;nbsp;compensation to artists such as Stevie Nicks, Neil Young and the dearly departed Tom Petty.

&l;!–nextpage–&g; The hits keep coming. Spotify&a;nbsp;&l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q;&g;settled a class action copyright lawsuit last year&l;/a&g;&a;nbsp;and has gained the wrath of notable artists like&a;nbsp;&l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;David Byrne&l;/a&g;&a;nbsp;of the Talking Heads and Radiohead lead singer&a;nbsp;&l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;Thom Yorke&l;/a&g;. While older, established acts have seen dwindling physical album sales and payouts, record labels &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;being paid billions&l;/a&g; and young bands eager to find an audience&a;nbsp;have embraced the service, as well as the music listening public, to the tune of &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;70 million paying subscribers&l;/a&g;.

Whether this newest lawsuit from Wixen affects Spotify&s;s&a;nbsp;IPO remains to be seen. In the meantime, tech companies and the investing world at large will be watching what happens very&a;nbsp;carefully.&l;/p&g;

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