Spotify stock opens at $165.90, giving streaming giant opening value of $29.5 billion
Spotify made a splash with its long-awaited debut on the public market, opening at $165.90 a share, placing the company’s valuation at $29.5 billion — up significantly from their $8.5 billion valuation back in 2015. Opening figures turned out to be considerably higher than projected numbers from last month when privately traded stocks were going for as high as $132.50 a share. The Swedish streaming titan, trading as SPOT, is now on pace to be the third-highest U.S.-listed tech IPO in history, trumped only by Alibaba Group Holdings’ $233.9 billion and Facebook’s $81.74 billion. For its debut on the New York Stock Exchange, Spotify opted to circumvent the traditional IPO for a direct listing, which comes with its own advantages and disadvantages.
With a rare direct listing, Spotify is avoiding investment-banking underwriters and instead choosing not to raise any money for itself. The move effectively saved Spotify millions of dollars in fees, while still allowing early investors the opportunity to cash out. However, without any intermediaries, investors don’t have the common protections allowed in a typical IPO. This could be risky with the recent downturn of tech stocks accross the board as the market aims to find a stable price for Spotify shares.
Spotify’s IPO paperwork reveals that the digital streaming leader is burning through heaps of cash, clocking revenue last year nearing $5 billon, but posting a net loss of nearly $1.5 billion. Thanks to the emergence of licensing deals with major labels, Spotify is able to reduce royalty payouts, contributing to a growing gross margin. Even with Spotify’s closest competitor, Apple Music, in close pursuit in the U.S. market, Spotify is projecting a $6.6 billion revenue bump by the end of 2018, up 30 percent from last year’s total. Digital streaming has undoubtedly changed the music consumption landscape in recent years. Now the digital streaming landscape could experience it’s own seismic shifts as Spotify officially plants its flag on the NYSE.