![]() The purpose of the AIM rule, and resulting market practice, is to ensure that directors and key shareholders of a company show commitment to the business and that they do not take unfair advantage of any uplift in the share price created by admission at the expense of other investors. In the UK, an admission of shares on AIM by a business which has not been independent and traded for at least two years requires its directors and key shareholders to agree to a lockup period of one year from the admission of securities in all other admissions and listings (including on the main market) similar lockups have become market practice. IPO business models are designed to create an uptick in valuation by building awareness about a company and drumming up excitement in the market. Without the stabilising bids and lock-up periods of an IPO, opening prices and early trading days are left entirely to the whims of the market. (Reuters) - Music streaming service Spotify, most recently valued at 13 billion, will be the first major company to carry out a direct listing on the New York Stock Exchange when it. ![]() Although shares slid throughout the day to eventually close at 149.01, the debut values. Though there are clearly a number of benefits to companies from direct listings, there are still significant associated downsides – such as volatility and missing out on the glamour and publicity of an IPO. The shares opened at 165.90 each, well above a 'reference price' of 132 the NYSE set Monday night. In addition, direct listings create a channel for early investors to make efficient exits while still allowing a company to raise money through follow-on offerings or selling convertible bonds if required. Spotify chose to list without a traditional 90 to 180 day lock-up period this in itself could eliminate the short selling hedge funds undertake before the lock-up period expires. Consequently, an IPO can become more expensive the more money that is raised but the company does not get greater net funds. Their fees for this can range from 3 per cent. In a traditional IPO, banks and brokers are responsible for marketing the new issue to investors and/or underwriters. The benefits of a direct listing primarily stem from cost savings and flexibility. ![]() to $149.01 each, the value of the company was $26.5bn this put Spotify in the top 10 largest US tech listings. Whilst the price dropped by the end of the first day of trading by 10 per cent. Spotify shares opened at $165.90 per share, above the reference price of $132 a share. After trading opened however, Spotify’s shares traded efficiently and with relatively little volatility. Initially it appeared that Spotify failed to convince enough shareholders to sell following its direct listing too constrained a supply would have artificially boosted its share price to an unsustainable level, inviting volatility to its share price. It sought to list its shares to fulfil a promise to original investors that they would have the opportunity to cash in their investments. Executives at Spotify maintained that it did not need to raise capital to fund growth. When Spotify sought its direct listing in April 2018, it opted not to offer any new shares, instead citing the desire to allow existing shareholders the opportunity to freely sell their shares on the open market.
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