Spotify Falls from IPO Highs

05 April, 2018, 01:36 | Author: Lucy Floyd
  • Spotify hits the right note

The Yomiuri Shimbun Sony Corp. said Wednesday it has sold some of its shares in Spotify Technology S.A., a major global provider of music streaming services.

Unlike a traditional Initial Public Offering, Spotify conducted a direct listing, meaning no banks underwrote the offering and no price was set ahead of the debut. The business had about $700 million invested in Spotify before it went public through a direct listing, according to a person with knowledge of the matter.

For context that's around the same figures generated by Snap Inc's controversial IPO, which saw the social media company valued at $28 billion (£23 billion) at the close of its first day of trading past year.

Spotify has filed a registration statement (including a prospectus) with the Securities and Exchange Commission ("SEC") relating to its ordinary shares. Facebook Inc and Alibaba Group Holding Ltd remain the largest tech stock listings in recent years.

The platform is nearly twice as large as its next biggest competitor, Apple Music.

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"Investors are right to have some reservations. Spotify is hemorrhaging from the costs of licensing content", Michael Carvin, chief executive of personal finance technology firm SmartAsset, explained. If Spotify chooses to take this route, it will mimic the offerings of Apple Music and Tidal.

By comparison, Apple's almost 3-year-old music streaming service has 38 million subscribers. It has 159 million total users, including people who are willing to listen to ads for access to free music. The company's losses, however, more than doubled, reaching €1.24 billion (£1.08 billion) in 2017 versus €539 million (£470.84 million) in 2016. According to Reuters, Spotify - trading as SPOT - had a largely stable first day of trading, and at closing time, the company's shares were trading at $149.01 per share, giving Spotify a massive market cap of $26.5 billion, bigger than Snap Inc. which made its stock market debut a year ago. The company instead chose to list existing shares directly on the stock exchange and cut out the underwriters who typically work to attract investors, set a price and stabilize the stock as it begins trading.

Colin Gillis, Chatham Road Partners director of research, on why Spotify shares will trade below $100 this year. The stock was on track to lose another 1% in after hours trading.

The only visible hiccup came when the NYSE also briefly flew a Swiss flag in honor of the Swedish company, which the NYSE later described on Twitter as a "momentary ode to our neutral role in the process of price discovery".

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