Spotify opens at $165.90, valuing company at nearly $30 billion
- Author: Valerie Cook Apr 04, 2018,
Apr 04, 2018, 1:11
Spotify is expected to reach 170 million listeners this year, up from the current 157 million, with paying subscribers slated to increase from 72 million to 90 million. Among its direct music-streaming competitors, Spotify dwarfs Pandora Media (P), which has a market cap of $1.2 billion. Direct listings are typically used for smaller launches, such as for a company emerging from bankruptcy or a public company's spinoff listing shares.
The difficulty in setting the price is likely related to the unusual nature of Spotify's offering. 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 focused on building its subscriber base.
Trading on the New York Stock Exchange under the ticker SPOT, shares promptly jumped well above the NYSE's reference price for $132, and above the Guggenheim price target of $175 per share.
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.
Spotify's unusual approach required the 200-year old NYSE to change its rules and secure approval from the Securities and Exchange Commission.
For Spotify, the direct listing process will save money by minimizing the role traditional Wall Street banks play in the process. Here's a piece outlining all you need to know about Spotify's public debut. But until then let's step back and admire this whole thing for the zeitgeist-ian work of art that it really is; Spotify is about to unleash the first authentically Millennial IPO. Many of these employees typically would have been barred from selling their stock for at least 180 days in a traditional IPO, Kennedy from Renaissance Capital said. And for its IPO, it opted for an unconventional "direct listing", bypassing Wall Street firms. The only problem was, they rose the flag of Switzerland instead.
This "novel method" for going public is the stock trading equivalent of opening a store and hoping people will just stop in. Spotify subscriptions, meanwhile, are growing by an average of 2 percent per month. But what's even more important to me is that tomorrow does not become the most important day for Spotify. It is also not known at what price the stock will start trading Tuesday. As much as this sounds like great news, what does this floatation really mean for the company?
"In normal IPOs, the underwriters stabilize the price - they put a floor under the price below which the stock price won't fall, because the underwriters will buy it at that price".