In a normal IPO, underwriters act as so-called stabilisation agents that can step in and buy shares if trading is weak. Demand is also a key part of price discovery, as that will play into the opening price for Spotify stock. Nobody knows what the price will be when the stock starts trading.
Spotify is joining the ranks of companies listed on the New York Stock Exchange today, and people are paying extra attention because of its unorthodox initial public offering.
Rather than offering an IPO, Spotify will instead be holding a "direct listing".
In a blog post on Monday, co-founder Daniel Ek said Spotify wasn't focusing on "the initial splash" but on the long term. "So while tomorrow puts us on a bigger stage, it doesn't change who we are, what we are about, or how we operate", Ek added.
"Normally, companies don't pursue a direct listing". The difference here is that unlike an IPO, where a company announces ahead of time how many shares it will be making available at a pre-defined price, a direct listing means that anyone who already owns Spotify shares will be able to sell them, or they might not. Ek has even hired the site's former finance chief Barry McCarthy to take the music service public. I think she saw the fans were asking for it.
Spotify can also point to some of the more volatile stock market debuts endured by other tech companies. With the company having been valued at $19 billion this past December, it was widely assumed that Spotify would be valued in the $22 billion to $25 billion upon going public. The price first settled at around $160, then continued to slowly fall until closing at $149.01 with over 28.66 million shares sold.
But the company has been suffering heavy losses and predicts it will see slower revenue growth in 2018.
The company's prospectus - published when they filed for an IPO in February - reveals details of the firm's finances, including revenues of 4.1 billion euros (around 5 billion dollars) in 2017, up nearly 39 per cent from the previous year.
If Spotify's IPO is a flop, it would support the IPO status quo, while also casting doubt on entire herds of tech unicorns with high-flying valuations, as well as the private markets that feed them. Unlike many online publications, we don't have a paywall or run banner advertising, because we want to keep our journalism open, without influence or the need to chase traffic.