Written by edgaragentsdb on March 6, 2018
On Wednesday, February 28, 2018, Spotify filed its prospectus to go public through a direct listing on the NYSE. In a direct listing, a company puts its shares on a stock exchange without first raising additional funds or offering additional shares.
The company avoids:
- Underwriters and their subsequent counsel fees
- The formal roadshow
- Testing the water discussions
- Traditional 180 day contractual lockup period
A company-direct listing was already available on both NASDAQ and NYSE, but in early February 2018, the SEC approved amendments to the NYSE rules which modify its listing standards in order to ease the requirements to direct listings.
- Confirmed by 3rd party valuation, a company’s market value of its publicly-held shares is $100 million
- The most recent trading price for the company’s common stock in a private market is $100 million
- If the 3rd party valuation values the publicly-held shares to be worth $250 million, the private market price is not needed
However, a company must still file an S-1 or F-1 registration statement with the SEC and they are still subject to SEC ’33 and ’34 Act reporting after the direct listing.
Is Spotify an example for other soon-to-be issuers?
Spotify is certainly exercising a disruptive feat. Direct listings have risks, and Spotify will be a real-time test on how a larger company – as their IPO offering amount was $1,000,000,000 – can withstand these risks. Spotify will mostly have no troubles, thanks to its large shareholder base, healthy financial position and global brand.
But for the rest of “us,” without an underwriter to generate support for the stock before it goes public, the pricing on the first day of the offering could be volatile. If too many stockholders choose to dump their holdings, the price of the stock could sink, while if too few stockholders sell, it could be difficult to fairly price the shares.
There are obvious benefits to executing a successful direct listing, but the bottomline is a company must have both heavy-duty interest from investors and a strong understanding on the value of their shares… all without the aid of an underwriter.
Reducing expense is paramount to all companies.
F-1 and S-1 registrations are costly – regardless of the offering amount, if you direct-list or work traditionally via an underwriter – all companies are looking to contain their IPO fees. Our expertise has shown us that one sure path to reign in fees is the Edgar Agents Locked-Cap Fee Program.
Our quoted fee:
- Eliminates rush changes
- Eliminates overtime charges
- Frees workgroup to focus on filing content, not “nickel-and-dime” cost containment
- Allows the workgroup to budget
Also, if your workgroup finds the marketing window has closed for the IPO, we have an Abort Fee. Only pay a small percentage of your guaranteed Locked-Cap Program. We guarantee that.
Edgar Agents is proud to help issuers, worldwide, reduce their financial risk of going public with our Locked-Cap & Success/Abort Fee Program. Click here to meet our CEO.