I can't think of a company as high profile as Spotify ever having gone public without underwriters. Are TMT bankers freaking out over this? Is it a preview of more such offerings to come? Any insight on why the mgmt/key investors chose this path?
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Is this even possible? Can you just IPO your company without going through the banks? How would investors even trust the price of the shares etc?
It's called hype. A lot of the VCs and investors in the Silicon Valley area, especially those who enter from absurd fields such as athletics or politics, don't really know anything about finance and hype up the ideas without seeing the tangible value. This sometimes work, but in most cases it fails. Thus the whole market will follow, but in cases such as snapchat, wall street shat on these investors with the real value and showed siegel and evans what their company was really worth.
You think investors can't value a company's shares without a bank's help? I'm sure every time a PM at Viking is going long on a company he calls the bankers at GS for their approval first.
I'm in M&A and focus mostly on tech and HC so I know the ECM guys well and have spoken to a few about this:
First of all, let's see what happens with the offering. The recent lawsuit and questions about future profitability and the potential of big M&A by apple, alphabet and amazon to bolster their own streaming services might dampen investor demand. I would be surprised if the lawsuit is as much of a hit as some might think.
Second of all, the deal isn't raising any new equity, it's just allowing some existing stakeholders to sell their stakes. That's different than most IPOs where they need fresh investor capital. The float is also going to be small and they're not huge, so they don't need the type of aggregate investor demand that an Uber, for instance, would likely need. The business model is still viable:
The main reasons companies hire underwriters are LIABILITY, investor credibility, and valuation expertise. You're probably right that the valuation expertise might not apply as much these days, but the first two do. The underwriter's valuations are key to help retail investors and fund managers feel good about buying into a company, even when questions and concerns may exist. The underwriter not only guarantees a price (which can help a lot if the pricing is dicey), but most importantly, takes legal liability for the offering. This is key. Companies will gladly pay in most circumstances just for a rubber stamp and to shift the legal burden of the offering to the banks.