Spotify didn't quite make sweet music with its IPO

Dianna Christensen
April 5, 2018

Spotify Technology SA shares surged following the largest-ever direct listing on Tuesday, giving the world's leading streaming music service a market value of almost $30 billion.

The company's launch comes at a hard time for the U.S. tech sector, as a series of political scandals surrounding companies including Facebook and Amazon has seen share prices tumble in recent weeks.

The music streaming company's shares fell by as much as 8.5% on their second day of trading, opening at $140 apiece and below Tuesday's closing level.

Instead, the company will allow existing shares owned by investors and employees to be traded publicly.

No Initial Public Offering means that there are no investment banks to underwrite (or sponsor) and price the offering.

Spotify is hovering around $29 billion in market value on its first day of trading as the streaming music service hopes to gain ground in a growing industry.

Spotify has 71 million so-called premium subscribers, including users who have given the company a credit card number for a free trial.

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Other big holders of Spotify stock include the investing firms Tiger Global, TCV and the Chinese conglomerate Tencent (which is the only shareholder subject to a unique lock-up arrangement.) Each of those control between 5 percent and 10 percent of the stock. It went public and the valuation closed at $26.5 billion.

In many public listings, and the investors pitch last month, Spotify has spoken about becoming a "platform". Investors had initially pegged the company's value at $30 billion when the market opened. Facebook Inc and Alibaba Group Holding Ltd remain the largest tech stock listings in recent years.

However, Spotify's revenues have been rivalled by the costs and fees paid to musicians for the rights to the music.

The company's path to Wall Street traveled a road littered with failed music streaming service companies.

It has around 80m more users than its nearest rival, Apple Music, and 25m more paying customers, but posted a loss of €1.23bn past year on revenues of €4bn.

Normally, companies ring bells.

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