Why it makes sense for Spotify to go public now

04 April, 2018, 01:11 | Author: Patty Aguilar
  • Spotify — Tomorrow

Its closest competitor, Apple Music, is expected to overtake Spotify as the most popular music service in the United States.

The stock began trading at $US165.90 a share shortly after noon, resulting in a valuation of roughly $US30 billion. This allows investors and staff of the Sweden-based company to sell as many company shares as they want, when they want. That puts the company value at $23.5 billion, and is on target with what CNBC reported last month when shares were traded on private markets were for as high as $132.50 a share. The company says it is present in 61 countries and its platform includes 159 million monthly active users and 71 million premium subscribers. "Spotify is a "cool" brand", said eMarketer principal analyst Paul Verna.

The public listing came after more than three hours of discussion among traders who struggled to set a price of the company: according to reports, it's the latest open for a NYSE-listed stock ever, beating out retail giant Alibaba which began trading just before noon in 2014.

Spotify has positioned itself as a key contributor to the reversal of the music industry's decline, by convincing millions of people to pay for an on-demand music subscription service.

Spotify's unusual approach required the 200-year old NYSE to change its rules and secure approval from the Securities and Exchange Commission. "Normally, companies don't pursue a direct listing", Ek wrote in a public post. Spotify's current chief financial officer, Barry McCarthy, held the same job when Netflix went public and remained in that position until leaving the video service in 2010.


Spotify laid out a number of reasons for listing its shares via a direct offering, including providing equal access to all buyers and sellers. And it feels like the right time to pause and acknowledge the thousands of Spotify employees around the globe who helped build out the Spotify ecosystem while staying true to who we are and what we believe.

"This won't be replicated often", Matt Kennedy, an analyst with Renaissance Capital, told CNN. The company's management said the firm didn't actually need to raise money, like most companies that IPO do.

Spotify is launching a direct initial public offering (IPO) in which it will sell stock under the ticker SPOT directly to investors instead, of going through an underwriter. Looking ahead, Spotify recently claimed that its paid subscriber base may grow to upwards of 96 million users by the end of 2018. That could make it even more hard for investors to settle on the right price for Spotify's stock, they say.

The NYSE had set a reference price of $132 for the stock, though the actual price will be determined by shareholders. It will not have some of the safeguards traditionally provided by investment banks, which try to prevent new stock from following below a certain price.

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