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Thursday, April 5, 2018

Record Direct Listing Sees Spotify Shares Make Leap

Trading on its first day on the New York Stock Exchange, shares of Spotify Technology SA experienced a 12.9 percent increase, outlining a rather straightforward debut for the company, which might mean the reliance on Wall Street brokers will not be needed for other companies looking to go public.
On Monday, the NYSE put the Spotify shares at a reference price of $132 and nearly a 26 percent increase saw them opening on $165.90. However, the session closed the share at $149.01, valuing the largest streaming service in the world at $26.5 billion.
For companies who are seeking to list directly on the market without selling newer shares, Spotify’s move was seen as a test. People had keen interest in it because if they were to succeed, it would mean company could save on millions of dollars of fees that they usually pay underwriters.
Chi-Hua Chien, who invested in Spotify early, said that the shares had a fair price and was independent of involvement from banks or institutional investors. Chien currently works for Goodwater Capital, a venture based capital firm based in San Mateo in California.
However, investors were warned by market-watchers to be careful, as this was only the first day of trading and recent tech IPOs had mixed performances in the market, with the music streaming competitors in abundances as well.
Spotify’s direct listing was the largest on record, as it crossed Snap Inc. in value, which is the owner of Snapchat. However, it could not beat the Alibaba Group Holding Ltd or Facebook Inc., which in recent years have been the highest tech companies to be listed.
A transformation is music was brought on by Spotify, as it overcame hurdles from various artists and record labels after making its debut. The company, however, has not yet made profits owing to competition from companies such as Apple Inc.
According to Michael Carvin, a technology firm SmartAsset’s chief executive of personal finance, reservations regarding the company are valid, as Spotify’s only source of income seems to be from content licensing. He also mentioned that Apple Music has done well because a wide of range of products it can market its music to, whereas Spotify has no such luxury despite it being twice the size of Apple Music in terms of scale.
46 million people are subscribed to the Apple Music services, whereas Spotify has 71 million people registered as premium subscribers, but with people who give their credit card numbers for a free trial, included in that number.
Other rivals of Spotify include Amazon Music Unlimited, which has 16 million subscribers to its name, as well as Pandora with 5.48 million subscriber in total. However, Google Play Music of Google does not provide data regarding the number of subscribers.
Spotify recorded a revenue of $5 billion in 2017, but the listing has seen the company’s enterprise value, which is calculated using the debt and cash in its balance sheet, increase five times that amount. This has meant that it has a higher ratio of enterprise value-to-sales than Pandora Media Inc., but significantly lesser than Netflix Inc. and Dropbox Inc.

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