Spotify’s low-cost listing raises awkward questions about banks’ role in IPOs
London — After shaking up the music industry, Spotify is now prompting investors to question the value they get from investment banks underwriting new listings with its low-cost initial public offering (IPO). The music-streaming company effectively deprived banks of hundreds of millions of dollars in fees by shunning them in its $26.5bn New York Stock Exchange float on April 3. Banks can charge companies as much as 7% of the amount raised in a US listing, and fund managers in London, another of the main centres for IPOs, say Spotify’s success means underwriters will now have to show more clearly what value they bring to companies and their backers. "Besides saving the right type of company a lot of money, the real positive demonstrated by this kind of listing is the level playing field it creates," says Trevor Green, head of institutional equities at Aviva Investors. Banks have been richly rewarded for co-ordinating IPOs and ensuring companies raise the money, pocketing annual fees ...
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