What to expect when Spotify goes public Tuesday

Digital music giant Spotify is joining the stock market on Tuesday, making it the biggest consumer tech company to go public since Snap debuted early last year.

But unlike Snap, Spotify isn’t doing an IPO. The “o” part of IPO stands for offering and Spotify isn’t raising any money.

Instead, existing Spotify shareholders will be selling shares directly onto the stock market. This means that employees, venture capitalists or anyone else who managed to buy Spotify shares on the  “secondary markets” can make money right away. But Spotify doesn’t know yet how many will want to sell their shares.

In fact, no one really knows how this “direct listing” is going to go. Even in Spotify’s prospectus, the company acknowledged that what it’s doing is “risky.” Smaller companies have listed without an IPO, but for a company of Spotify’s size, this is unprecedented.

Co-founder and CEO Daniel Ek claims that they are doing things differently because “Spotify has never been a normal kind of company.” In a release today, he wrote that “our focus isn’t on the initial splash. Instead, we will be working on trying to build, plan, and imagine for the long term.”

In a recent investor presentation, Ek said Spotify is doing this because of “our desire to become more transparent and more accessible.” Unlike a traditional IPO where employees don’t sell shares for months, known as a “lock-up,” Spotify insiders can sell on day one.

But like a typical IPO, Spotify will still be working with “market makers” to help determine the price that the company should begin trading. I’m told that this could anytime during the trading day on Tuesday.

Spotify doesn’t know how many people will be selling shares. If few people opt to sell, it will drive the share price up, because of limited supply. If a lot of people sell, the reverse could happen, if investor demand doesn’t match it. It’s likely that this process will lead to increased volatility in the first few days or weeks of trading.

But in the long-run, Spotify’s performance in the stock market will largely depend on investor philosophies about the company and its business model.

Some are concerned that Spotify will run the course of competitor Pandora, which has struggled on the stock market, partly due to hefty artist fees. Others argue that Spotify could be viewed as a Netflix, which has been successful at its entertainment licensing agreements.

But regardless of what happens Tuesday, Ek said that listing day is not time to celebrate. “You won’t see us ringing any bells or throwing any parties.”