Goldman’s Spotify sale rings alarm over tech IPOs

 
Mark Kleinman
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Goldman Sachs' share sale puts Spotify in spotlight (Source: Getty)

Spotify subscribers have 30m tracks to choose from, so perhaps it isn’t surprising if Goldman Sachs’ bankers and traders aren’t singing quite the same tune.

The sale by a Goldman hedge fund of $75m (£59m) of Spotify stock has yielded barely a murmur beyond the music industry press, but its significance might echo far more widely across Wall Street.

In addition to its presence on Spotify’s share register, Goldman is advising Spotify on its potential direct listing, which would eliminate the need to hire expensive underwriting banks such as, er, Goldman, and simply see its existing shares begin to trade publicly.

That decision cannot come before Spotify signs a new licensing deal with Warner Music Group, in all likelihood pushing a move to go public into 2018.

So Goldman, Morgan Stanley and Allen & Co, Spotify’s advisers on the float, have a couple of months to persuade Daniel Ek, Spotify’s founder, to pursue a conventional IPO.

Read more: Uh oh. Leaked reports show Spotify's losses have widened to over £300m

They must hope the appetite for a direct listing – which would yield big interest savings payable from a convertible bond issued by Spotify last year – falls flatter than a Rick Astley comeback. Whether the Goldman share sale highlights tensions over Spotify’s plans is unclear. But then factor in a filing with the SEC in the US this week by the fabulously named

Social Capital Hedosophia Holdings Corp, which plans to raise $500m as a blank cheque company, or cash shell.

Founded by tech heavyweights, it said the traditional tech IPO process had “acted as a driving force to deter private company management teams and their pre-IPO stakeholders from going public in the conventional way.

“We believe management distraction, a sub-optimal price discovery mechanism and the resultant longer-term aftermarket impact have discouraged private technology companies from pursuing IPOs,” it added.

That sentiment is shared by many in the tech industry, which chimes ominously for bankers’ prospects of attracting big IPO fees from future technology company listings.

Given Goldman’s central role in almost every major tech float of recent years, that outcome would be far from music to its ears.

May’s Japan jaunt

It’s no Air Force One, but even the RAF Voyager used to whisk Theresa May to Japan next week might look like an extravagance without a suitably impressive business delegation to accompany her. A Whitehall source suggested there may be as many government officials on board as private sector execs.

Downing Street sources dismiss that idea but won’t comment on the suggestion that the PM is generally keen to keep such trade trips on the minimalist side. She’s also said to dislike the “theatre” of the deal-signing ceremonies that are staples of trade missions.

I know of several company chiefs who have turned down the chance to join the trip, citing other commitments. Could that be a diplomatic way of excusing themselves from feeling the ongoing chill between Downing Street and the business community?

That might be a stretch. But with corporate Japan (a huge inward investor in Britain) feeling sorely alienated by the vote for Brexit, touching down in Tokyo with a half-hearted trade delegation would be a serious error of judgement.

Read more: Theresa May's migration policy meltdown

Rathbones not home and dry

The £2bn tie-up between Rathbone Brothers and Smith & Williamson looks a sensible deal in an industry that continues to demand consolidation.

It’s not quite a done deal, though. I hear another party might yet be lying in wait to pounce on S&W, roughly half of the shares in which are held by ex-employees and Canadian investor AGF.

An all-cash offer may yet turn heads.

Read more: How analysts are reacting to the Rathbones-Smith & Williamson merger talks

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