Spotify’s direct listing took advantage of 3 factors:
- They did not need or want the money an IPO brings in. An IPO brings in money, often hundreds of millions or even more to invest. Most companies want the capital, at least as a cushion.
- The large brand awareness helped with liquidity / trading. An IPO also helps start trading. Yes, the banks did this a bit with Spotify. But the investment banks and market makers in a true IPO take material financial risk to get trading going.
- The secondary market for private shares had already established a market. The company helped facilitate enough trades that a market already existed.
These 3 factors are not that common in companies that want to IPO. Some, probably most, either need or at least want the money. Most do not have the brand that Spotify has. And many have limited trading pre-IPO in the private, secondary markets.
But perhaps the next Spotify will now do it, when before they might not have. Could Dropbox have done it? Probably. But most of the rest of the recent crop of tech IPOs didn’t and don’t meet all 3 criteria.