Spotify will list shares in an effort fend off Apple and Amazon
Music streaming service Spotify filed for a direct listing of its shares yesterday. It lay out financial data for the first time that cheered some analysts but led others to question how it could turn a profit from its growing subscriber base.
Spotify, or SPOT at it will trade on the New York Stock Exchange, is taking an unusual path to the U.S. public markets, with a direct listing that will let investors and employees sell shares without the company raising new capital or hiring a Wall Street bank or broker to underwrite the offering. The streaming service is not going to be issuing shares though so it did not specify a listing price. Nevertheless, according to calculation, the business could be valued at approximately $19 billion USD.
Spotify, founded in 2008, now runs in 60 different countries and is the world’s largest music streaming provider. However, it is set to face significant competition in the future and this bold move to list shares is being viewed as a path to detracting its main competitors of Amazon, Apple and Google.
With 71 million premium subscribers globally, Spotify has about twice as many paying customers as music streaming runner up Apple, with 36 million. Including those who listen to advertising-supported streams, Spotify has about 159 million monthly average users.
Amazon Music Unlimited has 16 million paying subscribers, and Pandora Media Inc (P.N) has 5.48 million total subscribers.
Google has not said how many subscribers it has to Google Play, its music streaming service.
Interestingly, this move does not dilute ownership, as would happen with a conventional initial public offering, and saves hundreds of millions of dollars in underwriting fees. But it also frees existing owners from any lockup period restricting them from selling their shares following the listing.
Underwriters that provide price stability for new listings are not used in a direct listing, which could mean a volatile start for Spotify shares in public.
Nevertheless, it will be interesting to see how SPOT competes in the global market.