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As everyone was in holiday mode a few weeks ago in December, Spotify confidentially filed documents with the SEC .

Previously, I and examined how those figures looked before an IPO filing. Now we can see how those numbers look in context.

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This filing bolsters prior reports that Spotify would forego a traditional IPO in favor of a direct listing, a method of going public that has left many scratching their heads. For those unfamiliar with it, a direct listing is a way allow a firm鈥檚 shares to begin regular trading while avoiding the normal IPO roadshow process.

When asked about the direct listing strategy, IPO expert of told SA国际传媒 News that there are a few reasons companies might choose to pursue the strategy. It typically boils down to the fact that the company may not be 鈥渟trong enough鈥� to transact a traditional IPO due to these reasons:

1. The company鈥檚 growth (or lack thereof).
2. The company鈥檚 size (in terms of revenue).
3. The general climate of the industry.

So do these reasons provide Spotify grounds to go direct, especially considering how much money could be left on the table? Let鈥檚 find out.

1. Company Growth

Spotify has the kind of crazy growth that companies dream of. As its subscriber numbers have gone from 50 to over 100 million users, Spotify鈥檚 valuation has . It鈥檚 worth remembering, though, that while the total subscriber number sits somewhere north of 130 million users, approximately .

So Spotify is big enough to attract attention and generate a lot of excitement. In fact, because Spotify is such a well-known company to go public, an IPO roadshow seems to be precisely what it would want. More attention and more hype might mean more money on gameday.

2. The Company鈥檚 Size

This kind of fast-paced growth also contextualizes the music company鈥檚 size in terms of its revenue. According to Daniels, the size of a company鈥檚 revenue will dictate how larger institutions view it; if the revenue looks too small, larger institutions could deem the company too early or too risky, and therefore might be uninterested. But given Spotify鈥檚 outsized growth, though, perhaps this is a reaction to its continued unprofitability (as of yet).

3. General Industry Climate

Daniels also noted that in some direct listing cases, the decision to forego a traditional IPO could be something as simple as a timing issue. Industries go through hot and cold periods, and a cold period could convince a private entity to forgo the public process.

However, this doesn鈥檛 typically apply to the music industry. Because of , music companies tend to be more well-known among public investors than, say, a company which perhaps works on tooling or shipping. Therefore, Spotify has no reason to think that the climate would change at all between now and an expected 2018 IPO date.

Going through Barrett鈥檚 list of reasons, we can see that Spotify鈥檚 direct listing doesn鈥檛 pass muster on these grounds. But there are two outside arguments that augment the viability of direct listing: saving money on the IPO process and stopping the clock on Spotify鈥檚 convertible debt raise.

Saving Money

Outside of Barrett鈥檚 outline for going direct, Spotify could limit costs by foregoing a normal, pre-IPO roadshow. However, that this doesn鈥檛 make much sense. The money which Spotify would save on an IPO roadshow is negligible compared to the amount it would ultimately raise in a normal IPO.

But there are other ways Spotify can save money.

Stopping The Clock

Last year, Spotify took on convertible debt from Dragoneer and TPG, . According to , by listing directly, Spotify could essentially 鈥渟top the clock鈥� on these debt-conversions, and presumably, save itself tens of millions of dollars.

As a refresher, under the terms of these notes signed in 2016, Spotify was required to pay 5 percent annual interest, a figure that grows by 1 percent every six months for a total of 10 percent. Investors could then convert the debt into equity at a 20 percent discount of Spotify鈥檚 IPO price. If there were no IPO within a year, the discount at which investors could eventually buy back stock would increase 2.5 percent every extra six months.

The Questions Left Lingering

All of this leaves a lingering question: if neither of the two most-cited arguments hold water, does the decision to direct list have anything to do with Spotify鈥檚 $20 billion valuation? There have been, as of late, multiple sources which have raised concerns, and opining . Spotify did not respond to a request for comment.

The streaming market also faces stiff competition. Apple can subsidize its music service until the end of time through its phone and computer sales. , and launch. , and its post-IPO performance doesn鈥檛 bode overwhelming optimism. All of this is now against the backdrop of a filed by Wixen Music Publishing against the streaming music company.

Additionally, here are a few numbers we don鈥檛 know which will impact Spotify鈥檚 business model long-term:

1. What Spotify royalty rates are. It has been reported the company pays anywhere from 58 percent to 83 percent.
2. How often Spotify needs to renegotiate royalty deals with the major labels.
3. What the percentage stakes each major label owns of Spotify.

We鈥檒l see how things roll out by the end of Q1.