Spotify's plans to skip a traditional initial public offering is reportedly facing scrutiny by federal regulators. According to a report in Bloomberg, senior Spotify executives met with U.S. Securities and Exchange Commission officials last month who were seeking more details on Spotify's plan to bypass the conventional IPO as they go public.
Spotify has indicated that they plan to be listed on the New York Stock Exchange later this year through a direct listing, and that's drawing scrutiny from the Securities and Exchange Commission.
If Spotify is allowed to proceed with their plans to directly list on an exchange, they will be the largest company to have done so and a first for the NYSE, Bloomberg said.
While IPOs were once quite common, they have become less so in recent years, with the ones that do happen often were in conjunction with tech giants such as Google and Facebook going on buying sprees for companies to take public.
As well, a number of high profile IPOs in recent years, such as the initial offering from home meal company Blue Apron, have proven to be missteps for the company and investors, leaving tanking shares and litigation in their wake.
The direct listing will also be an early test for SEC Chairman Jay Clayton. Clayton, a former Wall Street lawyer, was appointed to oversee the regulatory agency in May and has indicated that he wants to encourage more IPOs by reducing regulatory obstacles, though he has yet to outline a plan to make that happen.
Spotify has hired Goldman Sachs Group Inc., Morgan Stanley and Allen & Co. to oversee its listing and has assembled a substantial war chest for the process, having raised more than $1 billion in equity and backed by an additional $1bn convertible loan from a consortium of investors led by TPG.