Spotify IPO: Swiss flag snafu marks first day of trading

Muriel Hammond
April 4, 2018

Shortly before Spotify began trading on Tuesday, Amazon teased that it now has tens of millions of active subscribers for its music service, though it did not reveal an actual number.

Spotify on Tuesday debuted as a publicly traded company, hoping that its streaming music model will be a hit with investors and a boon to artists.

Spotify is a company that has been burdened with issues particularly in the latter half of its existence.

Its shares opened at $165.90, up almost 26 percent from a reference price of $132 a share set by the NYSE late on Monday, but later pared gains to trade at $149.30, as some investors expressed concerns about the company's costs and the difficulty of competing against Apple.

If successful, Spotify could become a roadmap for the array of multi-billion dollar tech companies, investors are now hoping will go public soon, including Airbnb, Lyft and Uber. The Wall Street Journal recently reported that the iPhone maker could overtake Spotify in the soon as this summer.

Follow Spotify's movement on the NYSE.

If Spotify can avoid too many wild swings in the coming days, its alternative public listing process could entice other big name companies who don't need to drum up as much investor demand as companies do in a traditional IPO.

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.

Spotify earned 90 percent of its roughly $5 billion in revenue in 2017 through its paid subscribers; the rest was made up by ads for its "free" music product.

Ek said his company chose to skip the IPO phase because he wasn't interested in "the pomp and circumstance".

"This direct listing will cost them only 10 to 15 per cent of that amount - that's a major cost saving", he said. Instead, company insiders and investors will be selling their existing stock. But what's even more important to me is that tomorrow does not become the most important day for Spotify. The company is using a so-called direct-listing process. Spotify will be straight listed on the NYSE without additional shares or fundraising.

Spotify will nonetheless be closely watched as it starts trading as the market weighs whether to believe that the company - big in cool factor but short on profit - has a rosy future. Spotify subscriptions, meanwhile, are growing by an average of 2 percent per month.

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

"If the stock is choppy when it takes off the stabilization agent attempts to create a floor of where the stock price could go", said Lise Buyer, an IPO consultant with Class V Group in Silicon Valley.

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