Spotify Ltd. has taken a big step forward in its unusual, and potentially risky, journey to becoming a publicly traded company.

That’s according to a new report today in Axios, which cited several sources as saying the music streaming giant had confidentially filed documents for a stock market debut last month. Companies that generate annual revenues of less than $1 billion can commence an initial public offering without a public disclosure thanks to the 2012 JOBS Act. What sets Spotify apart from other tech firms that have exercised this option, a group that includes Twitter Inc., is the way it’s approaching the move.

Instead of a traditional IPO, the company is reportedly pursuing what’s known as a direct listing. The difference between the two lies in the way that shares are sold.

A normal IPO is underwritten by Wall Street institutions that set the target price, find investors and handle all the other logistical details. Shares begin trading on the open market shortly after the initial offering concludes. A direct listing, by contrast, cuts out the middleman by allowing a company to go straight to the stock market without a predetermined price.

Few firms opt for this approach since there are significant risks involved. Unlike in an IPO, there are no underwriters to take action if a stock’s price experiences too much volatility on the first day of trading. Because of the unique circumstances of the move, Spotify’s decision to go with a direct listing has attracted special scrutiny from the U.S. Securities and Exchange Commission.

However, the potential payoff may be worth it for the music streaming provider. A direct listing would enable Spotify to avoid the substantial underwriter fees involved in a regular IPO, as well as speed up the process. The latter point is important because the terms of the $1 billion debt round that the company raised in 2016 reportedly gave it strong incentive to go public as soon as possible.

A source told the Wall Street Journal that Spotify will be listing on the New York Stock Exchange. This seems to confirm a leak from May, which indicated that the NYSE was working to change its rules to accommodate the company. 

Spotify’s direct listing is expected to take place by the end of the quarter. The news comes just a day after the company was hit by a massive $1.6 billion lawsuit from a music publisher in a development that could potentially complicate its stock market plans.

Image: Spotify