Welcome to the Private Markets Express, a digest of small pieces of private equity knowledge gathered for your reading pleasure. Continue reading “Private Markets Express Update: May 19, 2017”
In April, Spotify signed a deal with Universal Music Group Inc. to make its platform more attractive to top-selling artists like Adele, Lady Gaga, and Coldplay by letting them release albums exclusively to premium users. Spotify is also working towards deals with Warner Music Group and Sony Music in the run-up to the IPO.
With deals and negotiations in the works, Spotify is aiming for a direct listing on the New York Stock Exchange when it is expected to go public late 2017 or early 2018, according to Axios.
Dan Primack of Axios offered his thoughts about Spotify’s reported direct listing:
“A direct listing would save Spotify some Wall Street underwriting fees, but that isn’t the music streaming company’s motivation. Instead, Spotify has watched the wild, post-IPO share price ride of consumer-facing companies like Facebook and Snapchat, and believes that a direct listing’s lack of a quiet period could help the stock reach “equilibrium” quicker.”
Dan Primack also shed some light on why Spotify is pushing to go public now:
“Spotify doesn’t have immediate cash needs, with $1.7 billion on its balance sheet, but the company is 11 years-old and early shareholders (particularly employees) want some liquidity.”
The direct listing will give Spotify employees the ability to cash out their holdings without the company having to pay the underwriting fees that are normally involved with an IPO.
According to Reuters, Spotify was most recently valued at $US 13B ($CAD 17.6B). Spotify is working closely with investment banks Morgan Stanley, Goldman Sachs Group Inc. and Allen & Co. to advise them on the process.
The direct listing route is also beneficial to the company because “Spotify raised $1B in convertible debt in March 2016 from TPG, Dragoneer and clients of Goldman Sachs. Terms of the deal were described by TechCrunch as “devilish,” with the note-holders able to convert to common equity at a 20% discount to Spotify’s eventual IPO price. Moreover, that discount began climbing by 2.5% every extra 6 months, assuming that Spotify didn’t go public one year after the debt issuance (which it didn’t).
Here’s the big rub: Spotify isn’t going to have an IPO price if it does a direct listing.” Dan Primack called this the wildcard of the direct listing route that Spotify is pursuing.
So what’s the difference between a traditional IPO and a direct listing?
- Investment bank underwriters sell new shares of a company to the public
- Price determined on investor feedback
- Underwriters are backed by an IPO syndicate, comprising of several banks
- Share the responsibility of selling and allocating shares to investors
- Company doesn’t raise money by offering new shares
- Makes existing shares of employees and investors available to the public
- Employees and investors can buy and sell as they wish
- No “lock-up” period to prevent early investors and employees from selling their shares
Although the direct listing route is less popular than the traditional IPO, it has been around for decades and has been done by many companies. According to NY Times, Ben & Jerry’s and Annie’s Homegrown are some examples of companies that have gone this route. NY Times also says that California has some 150 to 200 direct offerings annually. While traditionally used for smaller companies, Spotify will be the first major company to carry out a direct listing on the New York Stock Exchange. Typical for a company that is continually disrupting the industry.
Last week, DocuSign announced some growth numbers:
- Year-over-year user growth hits 135%
- More than 300,000 customers
- More than 200 million users across 188 countries
- Average of more than 300,000 users added daily
This week brings another development for the rapidly growing tech company. DocuSign announced its partnership with Microsoft Azure as its preferred cloud services platform, which will enable the international scaling of DocuSign’s platform and service.
CEO Dan Springer commented on the partnership: “We need the agility to ramp up our cloud services quickly and efficiently to meet varying demands. We already have a strong carrier-grade private cloud infrastructure in place in many markets. But in choosing Microsoft Azure we have access to a highly secure, global cloud that offers data redundancy in multiple in-country locations for business continuity – something that’s an absolute prerequisite for us given we operate a high-availability business.”
DocuSign has chosen to initially focus this partnership on Canada given the potential of the digital transformation market and the country’s renewed focus on innovation.
Kevin O’Leary, celebrity entrepreneur on CBS’s Dragon’s Den and ABC’s Shark Tank, and a member of the DocuSign Advisory Board says, “With DocuSign I can now get to agreements faster, and deliver on those agreements with speed and agility. That has been a game-changer for me, and I have no doubt it will do the same for the public and private sector across Canada.”
As for DocuSign’s international expansion plans, the partnership with Microsoft Azure will provide the flexibility to meet the growing demand around the world.
Dan Springer believes, “There is incredible potential for digital transformation across Australia and New Zealand, Japan and greater Asia, Europe and many parts of Latin America. And we’re looking forward to our new-found flexibility to meet customer, partner and developer need in those markets thanks to Microsoft Azure.”
DocuSign’s rapid growth reflects the demand for DTM (Document Transaction Management) and e-Signature solutions on the global scale. Total demand for DTM is predicted to reach $30.6B by 2020.
The DocuSign Momentum 2017 conference in San Francisco highlighted the company’s continued success and customer growth. Continue reading “Thumbs up to DocuSign”
As some of you may know, InvestX lives and breathes in the private equity marketplace, and so do big buck venture capitalists – one being billionaire Chris Sacca. Continue reading “Venture Capitalist Chris Sacca is “hanging up his spurs””
InvestX is proud to offer DocuSign as our latest private equity deal – the market leader in e-signature and DTM (digital transaction management). Here, we list the top 3 reasons why we love DocuSign and are proud to bring another market-leading company to our investors. Continue reading “DocuSign: Say Goodbye to Paper Documents”
Here is a weekly wrap-up of everything you need to know about the private markets. Continue reading “SpaceX and NASA want to land on Mars; Airbnb could have plans to IPO in 2018”