Spotify hits Wall Street, valued at nearly $30 billion
Spotify made its public debut two days ago, opening at a price of $165.90 per share on the New York Stock Exchange (NYSE), giving the streaming service a market value of just under $30 billion. The Swedish streaming giant chose quite an unconventional approach for going public, as it hit Wall Street by ‘direct listing’ in order to save money on banking fees. Usually when bigger companies (like Spotify) go public, they would follow the ‘IPO procedure’ (Initial Public Offering), meaning the company offers its shares for sale to the public for the first time. It’s a way to raise money for the company’s growth and upcoming projects in the future. As if Spotify’s interesting approach itself wasn’t enough, the NYSE caused even more commotion by accidentally flying the Swiss flag instead of the Swedish one in celebration of the historic day…
Business analysts wonder why Spotify really chose the direct listing method for going public. The traditional IPO method would have created more shares for the company, shares that could have been sold to raise money. Spotify however did not raise new capital. Instead, it simply listed existing shares directly on the NYSE without relying on underwriters to attract investors, set a price and stabilize the stock as it begins trading. All the existing shares held by investors (in Spotify’s case large music labels, employees, etc.) can now be traded on the public markets. As a result, there will be more uncertainty with the price being completely set by the market.
Spotify founder and CEO Daniel Ek further explained the untraditional manner of going public as follows:
“Normally, companies ring bells. Normally, companies spend their day doing interviews on the trading floor touting why their stock is a good investment. Normally, companies don’t pursue a direct listing. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company. As I mentioned during our Investor Day, our focus isn’t on the initial splash. Instead, we will be working on trying to build, plan, and imagine for the long term.”
Spotify’s success definitely hasn’t come cheap. The streaming platform, which was founded in 2006, lost about $1.5 billion in 2017, more than double the loss from 2016. On top of that, the company is still in the midst of a $1.6 billion lawsuit from Wixen Music Publishing, which represents the works of artists like Neil Young and Tom Petty. Wixen seeks to remunerate both songwriters and rights holders, claiming Spotify failed to compensate songwriters as the music industry shifted to streaming.
So far, Spotify’s Wall Street debut is quite successful. On its first day of trading, the music streaming service finished with a valuation of $26.5 billion, while the share price closed at $149.01, with over 28.66 million shares sold. That share price is 13 percent higher than the $132 reference price set by the NYSE. It will be interesting to see how this story will develop, especially in the near future. You can follow Spotify’s movement on the NYSE and watch a video of the company going public right here.
— NYSE – We Are Living Tech (@NYSE) April 3, 2018