The SEC Division of Trade and Markets (the "Division") granted no-action relief to Sweden-based music streaming service Spotify from certain Regulation M prohibitions. Regulation M prohibits manipulation by individuals with an interest in the outcome of an offering, and prohibits activities that might artificially influence the market for an offered security.
Spotify plans to publicly list its shares on the New York Stock Exchange ("NYSE") without engaging in an underwritten initial public offering. The company filed a registration statement with the SEC on Form F-1 with respect to certain resales of its shares by existing shareholders. The company will not offer or issue any new shares under Form F-1. Resales of the shares will be made solely through ordinary brokerage transactions at prevailing market prices. Spotify plans to engage in certain investor relations and education activities that could cause the registration and direct listing of its shares to qualify as a "distribution" pursuant to Regulation M and, thus, to become subject to trading restrictions under the regulation until the end of a restricted period.
The Division granted Spotify's request for relief under Regulation M Rules 101 (Activities by distribution participants), and 102 (Activities by issuers and selling security holders during a distribution). The company will be required to adhere to several conditions including observing the restricted period which will begin on the fifth business day prior to the determination by the designated market maker of the opening price of the shares and end when secondary trading begins on the NYSE.
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