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All trading involves risk. Losses can exceed deposits.
Spotify IPO
Spotify went public on 3 April, with the company valued at around $26.37 billion when the markets closed. But where next for Spotify?
All trading involves risk. Losses can exceed deposits.
Why trade Spotify with IG?
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Speculate on Spotify
Leverage your exposure with CFD trading or spread betting
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Go long or short
Think the company will underperform? Take a short position
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Buy Spotify stock
Invest in Spotify with a share dealing account
How to trade Spotify
Now Spotify’s listing is complete, you can go long or short on its stock via spread betting and CFD trading, or buy it outright via share dealing.
What happened when Spotify floated?
The streaming giant opened on the New York Stock Exchange (NYSE) at $165.90 – well above the $132 guide price which was based on recent private sales.
However, shares fell throughout the day, closing around 10% lower at $149.01 for a market capitalisation of $26.37 billion.
The day as a whole then was neither a complete disaster nor triumph; early buyers lost some money on paper but the company still ended the day above the guide price.
Where will Spotify go next?
It may have a strong brand and a large user base, but the company is yet to turn a profit – with some questioning whether it ever will, given the size and cash reserves of competitors such as Apple (Apple Music) and Alphabet (Google Play Music).
One potential issue is that Spotify will now need to balance the interests of its shareholders, who may demand cost-cutting measures including better deals with record labels, while competing with cash-rich tech giants who can absorb losses on their services. Adding to the complexity is Spotify’s limited bargaining power – 85% of all music streamed on the platform in 2017 was produced by one of the ‘big three’ record labels (Universal, Sony Music and Warner Music), so the service is very much reliant on their content.
However, Spotify still has plenty to be optimistic about. It remains the largest streaming service and is well positioned to produce original music and help artists reach audiences directly – both of which could help insulate it from its competitors and reduce its reliance on record labels in the future.
Key Spotify facts
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Spotify opened trading on 3 April at $165.90 per share, valuing the company at $29.5 billion
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It ended its first day trading at $149.01, for a market capitalisation of $26.37 billion
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Instead of a traditional IPO, Spotify listed directly, joining the New York Stock Exchange (NYSE) as SPOT
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Before its flotation, Spotify disclosed revenues of €4.09 billion for 2017, up from €2.95 billion in 2016, with a €378 million operating loss in 2017, up from €349 million in 2016
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As of last year, Spotify had 159 million monthly active users, and 71 million premium subscribers
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It claims to have nearly twice as many premium subscribers as Apple Music
Spotify: an IPO or a direct listing?
Spotify didn’t apply for a traditional initial public offering, it chose to float via a direct listing. While the outcome for retail investors was largely the same – Spotify shares were made available to buy and sell on the NYSE – there are some important differences between the two.
The biggest of these is that no new shares were issued, so Spotify didn’t raise capital from the listing. Instead, existing shareholders were able to sell their shares to the public for the first time. That meant Spotify didn’t need to get a bank to underwrite its offering or undertake a lengthy roadshow, cutting down costs. It also meant that existing shareholders’ positions weren’t diluted.
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