IPO alternatives appear to be alive and well, as we learn from press reports that unicorn music service Spotify may go public through a “self-filing.” In my first book, over 10 years ago, I talked at length about the potential value of this very straightforward technique. Assuming you otherwise qualify for an exchange listing, you simply file to register some already outstanding shares for trading, without raising new money, and off you go. Recent self-filers included Coronado Biosciences.
The main benefit of most IPOs? Raising money. Apparently Spotify, having raised $1 billion, is good on that front. Then why do they want to go public? Not sure, but the most common reasons are to raise more money in the future, to make acquisitions easier using public stock as currency, to reward executives with valuable stock options, and to create a path to liquidity for those who have founded and built the company.
Through this process, Spotify saves dilution from IPO investors and the cost of underwriters. Why raise money you don’t need? Since reverse mergers, which also can be used in the “no need to raise money” scenario, are much more difficult to do these days, self-filings deserve some attention.
David Feldman
David N. Feldman is a partner at Duane Morris LLP, where he concentrates his practice on corporate and securities law and mergers and acquisitions, as well as general representation of public and private companies, entrepreneurs, investors, and private equity and venture capital firms. Mr. Feldman also advises small businesses with regard to alternatives to traditional financing through initial public offerings. His popular blog at www.DavidFeldmanBlog.com, focusing on entrepreneurship and the regulatory environment, has been recognized by LexisNexis as a Top 25 corporate law blog, and his videos appear on his YouTube channel, The Entrepreneur’s Advocate. Mr. Feldman is a 1985 graduate of the University of Pennsylvania Law School, where he was managing editor of the student newspaper, the Penn Law Forum, and a graduate of the Wharton School of the University of Pennsylvania. He has served as chair of the board of Wharton’s global alumni association.
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