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When Spotify’s shares begin trading April 3, less than one-third of them will be available for sale, a move designed in part to prevent a deluge of shares from instantly hitting the market in the streaming service’s unusual initial public offering.
The company said in updated IPO documents Tuesday that roughly 55.7 million of its total 178.1 million outstanding shares will be available for sale on the first day of trading. Daniel Ek, Spotify’s co-founder and CEO, will be eligible to sell 15.8 million shares — less than a third of the total amount he owns.
Spotify also came to agreements with some of its shareholders that they would only sell up to a certain amount of their holdings on the first day, according to a person familiar with the process. It is unclear when they will eligible to sell the rest.
The move appears to be a way to impose some limits on what is a largely untested way for a company to go public. That route, known as a direct listing, allows the company’s existing shares to begin trading openly on an exchange, creating a liquid market for them. Unlike a typical IPO, this route largely eschews underwriting banks and won’t raise any additional money for the company. That means the market will set the initial price for shares rather than a bank.
An expanded version of this report appears on WSJ.com.
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