Spotify Goes Public, Listed On NYSE

Alan Olson
April 4, 2018

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.

The Associated Press reports that Spotify competitor Pandora is valued at $1.2 billion, and that the streaming service has been compared to having the growth potential of Netflix which is worth about $122 billion.

Analysts had anxious ahead of Spotify's direct listing that forgoing hiring investment banks as underwriters or holding traditional promotional events with institutional investors could mean volatility once formal trading kicked off. Direct listings are typically used for smaller launches, such as for a company emerging from bankruptcy or a public company's spinoff listing shares.

Even though it has been around for years, Spotify is just now becoming a publicly traded company with a multi-billion dollar IPO.

In the USA, subscribers can pay $9.99 per month for a standard music streaming plan, or $14.99 for a family plan with up to five accounts.

Drew Pascarella, lecturer of finance at Cornell SC Johnson College of Business, says that Spotify's unorthodox listing is a one-off, unique situation as the company does not resemble classic pre-IPO firms.

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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.

The company filed papers with the US Securities and Exchange Commission to go public in late February. Experts warned of some major volatility though due to Spotify's unusual 'direct listing'.

The opening public price was determined by buy and sell orders collected by the NYSE from broker-dealers.

But analysts pointed out the listing saved Spotify tens of millions in fees and gave employees and early investors a chance to cash out.

Rather than pursuing a traditional initial public offering or IPO, Spotify offered a direct listing, meaning it wouldn't be issuing any new stock. For example, the company didn't work with bankers to sell shares through institutional investors. The opening price puts the company's value at almost $30bn, making it one of the largest USA listings for a tech company in history. That could make it even more hard for investors to settle on the right price for Spotify's stock, they say. The stock market has also been volatile recently with the Dow Jones industrial average falling more than 450 points, or almost 2 percent, Monday.

Traditionally, when a company wants to enter the stock exchange, banks are contacted to drum up investors and stabilize a price point.

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