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Among the many things that distinguish Spotify's upcoming share sale from a typical IPO, there's this gift for existing investors: they can cash out whenever they want.
The music-streaming company filed for its offering on Wednesday without the inclusion of underwriters. It will also lack a traditional 180-day lock-up period, when major investors are typically forbidden from selling their shares to avoid flooding the market.
"Consequently, any of our shareholders, including our directors and officers who own our ordinary shares and other significant shareholders, may sell any or all of their ordinary shares at any time (subject to any restrictions under applicable law), including immediately upon listing," the company said.
The one exception is Chinese internet company Tencent, which owns 7.5 percent of Spotify's ordinary shares. According to the filing, affiliates of Tencent (and TME — Tencent Music Entertainment Group), agreed not to sell ordinary shares for a period of three years from Dec. 15, 2017.
Spotify CEO Daniel Ek , who owns 25.7 percent, and co-founder Martin Lorentzon, who owns 13.2 percent, aren't subject to that agreement. Nor is Tiger Global (6.9 percent), Sony (5.7 percent), or Technology Crossover Ventures (5.4 percent).
When a lock-up period ends, it can spur significant volatility for a stock — just ask Snap. Even though CEO Evan Spiegel promised not to sell shares for the full year after the IPO, the stock fell in late July and early August as the lock-up expired.
Insider sales also might stoke fears in the market that the company's core backers don't believe in its future prospects.
The absence of a lock-up period is one of the four risks Spotify cited in its section related to the risks owning ordinary shares. The other potential concerns are that there won't be any underwriters or a given price range, there won't be a fixed number of shares for sale and there won't be a roadshow to market the offering.
"Such differences from an underwritten initial public offering could result in a volatile market price for our ordinary shares and uncertain trading volume and may adversely affect your ability to sell your ordinary shares," the company said.
(Clarification: A previous version of this story referenced Spotify's planned $1 billion offering. While the company included that number in the filing, we've removed it because it's just a placeholder.)