Rather than raise money by issuing newshares to the public through a traditional initial public offering (IPO), Spotify made its existingshares available for purchase on the public exchange through the seldom-utilized direct listing process. (Spotify) went public through a direct listing of its ordinary shares on the New York Stock Exchange (NYSE). On April 3, 2018, global music streaming company Spotify Technology S.A. By walking through the precise statutory elements of a direct listing and by calling attention to latent liabilities in the process, this Comment seeks to set forth a path for future technology unicorns to follow the Spotify playlist.
As this financial innovation unfolds, an important question remains: Who is liable as an “underwriter” in a direct listing for purposes of liability under Section 11 of the Securities Act? This Comment argues that the investment banks Spotify retained as financial advisors qualify as statutory underwriters notwithstanding language in the registration statement to the contrary. In recognition of these developments, this Comment has two aims: to shed light on the statutory contours of a direct listing and to contribute to the legal understanding of underwriter liability. Major technology companies are now adopting a similar approach. Spotify worked throughout 20 alongside legal counsel and investment banks and in communication with the Securities and Exchange Commission to facilitate the unorthodox approach. Eschewing standard Wall Street practice, Spotify did not raise new money through the offering and instead simply made its existing shares available for purchase by the public. In April 2018, music streaming giant Spotify disrupted the traditional initial public offering modeland became a publicly traded company through a novel process known as a direct listing.
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