Season 2, Episode 6: Spotify’s Direct Listing

**Ben Gilbert** (0:00)
Did you read the mission statement on Spotify's F1?

**David Rosenthal** (0:05)
No.

**Ben Gilbert** (0:07)
So whereas last week Dropbox's mission is to unleash the world's creative energy, Spotify's is to unlock the potential of human creativity.

**David Rosenthal** (0:16)
You definitely should get some digs in on them.

**Ben Gilbert** (0:20)
It's an unrestrained hippie world out there. Welcome to season two, episode six of Acquired, the podcast about technology, acquisitions and IPOs. I'm Ben Gilbert.

**David Rosenthal** (0:43)
I'm David Rosenthal.

**Ben Gilbert** (0:44)
And we are your hosts. Today, we are covering a company making history, the week it makes history, Spotify and their direct listing, which is not an IPO.

**David Rosenthal** (0:56)
But if it were an IPO, this would be the largest IPO listing, whatever you want to call it, from Europe ever. And the seventh biggest of all time, debuting at about roughly $30 billion market cap.

**Ben Gilbert** (1:13)
Wow. And almost a billion dollars worth of shares on the first day traded.

**David Rosenthal** (1:19)
Yeah, trading hands.

**Ben Gilbert** (1:21)
Big company, big shake up in the industry over the last few years with the rise of streaming and a big change to the way that the companies go public. So, David, I'm excited to dig in and help understand myself exactly why they did a direct listing, what a direct listing is, and probably more importantly, excited to hear from you more about the history of the company itself.

**David Rosenthal** (1:46)
There's always a story, Ben.

**Ben Gilbert** (1:49)
All right. If you are new to the show, you should join us in our Slack at Acquired FM. There's over 1200 people talking about acquisitions, IPOs, tech news as it comes, and helping us do research for the show, and thanks to listeners who were throwing some interesting stuff about Spotify as David and I were researching. This is a great time to tell you about one of our very favorite companies, Crusoe.

**David Rosenthal** (2:15)
Crusoe, as listeners know by now, is a clean compute cloud provider specifically built for AI workloads. NVIDIA is one of their major partners, and literally Crusoe's data centers are nothing but racks and racks of A100s and H100s. And because Crusoe's cloud is purpose built for AI and run on wasted, stranded or clean energy, they can provide significantly better performance per dollar than traditional cloud providers.

**Ben Gilbert** (2:40)
Yes, we talked about that on our ACQ2 episode with Crusoe CEO Chase Lockmiller.

**David Rosenthal** (2:46)
The other element that makes Crusoe special is the environmental angle. Crusoe, of course, locates their data centers at stranded energy sites. So, think oil flares, wind farms that can't use all the energy they generate, etc. And uses that power that would otherwise be wasted to run your AI workloads instead.

**Ben Gilbert** (3:04)
Yep. Obviously, it's a huge benefit for the environment and for customers on cost since Crusoe doesn't rely on the energy grid. Energy is the second largest cost of running AI after, of course, the price you pay NVIDIA for the chips. And these lower energy costs get passed on to customers.

**David Rosenthal** (3:20)
It's super cool that they can put their data centers out there in these remote locations where quote-unquote energy happens, as opposed to the other hyperscalers such as AWS and Google and Azure who need to build their data centers close to major traffic hubs where the internet happens because they are doing everything in their clouds.

**Ben Gilbert** (3:36)
Yep. If you, your company, or your portfolio companies would like to use the lower cost and more performant infrastructure for your AI workloads, go to crusoecloud.com/acquired, that's crusoecloud.com/acquired or click the link in the show notes. Well, David, before we dig in, I spent a bunch of time, I think, as the news started to trickle out that Spotify was doing a direct listing, not an IPO, several months ago before they priced, before they had a date, before they had an F1, not an S1, to announce-

**David Rosenthal** (4:11)
As a foreign company issuer.

**Ben Gilbert** (4:12)
Oh, I didn't realize that the F1 is because they were not a US-based company.

**David Rosenthal** (4:18)
Not because of the direct listing, but because they are a foreign issuer.

**Ben Gilbert** (4:23)
That makes sense. Before we dig in, some things that you need to know about what is a direct listing or a direct public offering, which is not an initial public offering, the biggest difference is the company doesn't take any dilution.
If you're thinking about what does a company normally do in the IPO, there's two big reasons. One, they create liquidity for existing shareholders, so everybody who's got stock, sometime after that has the opportunity to sell that stock and get some liquidity on that. The other is that the company actually creates new shares, so all the previous shares get diluted, but the company gets to raise money, so they sell the new shares that they've created, they raise millions and millions of dollars to have money in their coffers. With a DPO, a company doesn't take any dilution and they don't raise any money. So Spotify doesn't have a dollar more in the bank account yesterday from selling shares that they do today. I guess, flip that.