Why it makes sense for Spotify to go public now

04 April, 2018, 01:17 | Author: Rolando Keller
  • Tyler Roi Conde

Since launching its streaming music service a decade ago, the Stockholm-founded company has overcome heavy resistance from big record labels and some major music artists to transform how the industry makes money.

Spotify, the largest music streaming service in the world, debuted in the U.S. stock markets today and they made their debut at $132 per share which makes the company worth more than $20 billion.

While anticipating that Spotify share prices could start off strong, he saw risks for the company - which has yet to extract itself from the red. Unlike other companies who handle this process with the involvement of investment bankers, Spotify is not issuing any new stock.

The company filed papers with the US Securities and Exchange Commission to go public in late February. In fact, some industry insiders are of the mind that Apple Music may boast more paid subscribers than Spotify as soon as this summer. Here's a piece outlining all you need to know about Spotify's public debut. The company said it brought in about $5 billion in revenue in 2017, up 39% year over year, and a net loss of about $1.5 billion.

Sweden-based Spotify is available in 61 countries with an overall user base that includes ad-supported free listeners of 159 million, and 70 million paying users as of January 2018.

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The growth was nearly entirely attributable to the public's embrace of streaming, with subscriptions to paid platforms such as Spotify, Apple Music, Tidal and the new service of retail giant Amazon growing 56 percent to 35.3 million users.

For Spotify, the direct listing process will save money by minimizing the role traditional Wall Street banks play in the process.

"Even with all the buzz that it's going to be a great tech IPO year, they're still few and far between", says James Gellert, CEO of RapidRatings, which rates the financial health of public and private companies. "Spotify has been the driving force in nothing less than a turnaround in the USA recorded music industry". Spotify will be straight listed on the NYSE without additional shares or fundraising. "Normally, companies don't pursue a direct listing", Ek wrote in a public post. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company. The firm did caution that SPOTIFY's unusual direct listing could lead to "unusual trading dynamics in the days and weeks following the APRIL 3rd listing". There is a possibility that Spotify stock will end up much higher today, however, as MarketWatch reports that signs point to a price closer to $155 or $160 per share.

"If the stock is choppy when it takes off the stabilization agent attempts to create a floor of where the stock price could go", said Lise Buyer, an IPO consultant with Class V Group in Silicon Valley.


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