Spotify will have its first IPO on April 3. “It is always interesting when someone in the tech industry takes an alternative approach to a traditional IPO offering,” he said. “I remember when Dutch auctions were a little popular with the Google and NetSuite IPOs. I’m skeptical we’ll see direct listings become a trend but it will be exciting to watch nonetheless. Overall, the U.S. tech IPO market is doing well and has a steady pipeline of deals, so I’m optimistic about 2018.”
Regarding his job description as partner and co-chair of Goodwin’s Capital Markets Practice, Kline said, “At Goodwin, we have one of the most active technology practices around the world serving as outside counsel to public companies who are listed on both U.S. and non-U.S. exchanges. But we’re not just a legal advisor, we’re also a business partner that dives in to help wherever we can whether its reviewing a company’s marketing plan or making connections to key industry leaders. As co-chair of Goodwin’s Capital Markets practice, I help ensure we support our clients throughout their entire life cycle, from early stage startups to large public companies in thriving industries including technology and life sciences. Capital markets transactions are my favorite part of my job, so what Spotify is doing intrigues me and pushes me to continuously create innovative solutions for our clients.”
Venture capital (VC) firms are affected by a company they’re invested in choosing to pursue a direct listing. “Everyone will be on the lookout for two things. First, if a balanced market develops with enough buyers and sellers and second, if it is orderly. If either does not happen, it will have a negative impact for VC firms if they want to sell their shares (or distribute shares and then have LPs sell directly). Under a traditional IPO, VC firms are subject to a 180 day lock-up which helps ensure a more orderly trading market. With a direct listing, they are not subject to this lock-up, so I expect, overall, we’ll see more market volatility over the next few months. If the market develops smoothly, VC firms could see their shares become more liquid more quickly than they could under a traditional IPO,” he said.
When asked about what kind of companies can realistically pursue a direct listing, he said, “Companies that have raised a lot of money in private markets and don’t need additional money through an IPO. They also need to have a high enough profile that the substantial marketing lift you get by listing on NYSE or NASDAQ in a traditional IPO won’t be material to your business. Spotify is a significant enough name, and widely known, so that won’t impact them. Same for companies like Airbnb and Uber. For most tech companies, the IPO is a door-opener to dramatically boost the company’s visibility so going public is an important marketing event, not just for investors, but also often to reach potential customers.”
On the impact of technology and streaming services (such as Spotify) on the music and entertainment industry, Kline said, “When I was young, I bought CDs. No one does that anymore. Both of my teenage boys have Spotify accounts and stream music. Technology has completely disrupted the industry,” he said.
