The Swedish music streaming company listed on the New York Stock Exchange without a safety net, and the result was one of the largest ever first-day valuations for a tech company.

By Joe McDonough


Posted on April 4, 2018

It was risky and unconventional but Spotify has opened with a flourish in its direct listing on the New York Stock Exchange (NYSE) on Tuesday.

The music-streaming company closed the day at $149.95 per share, according to MarketWatch, with a valuation of $26.5 billion.

While it peaked at $169 per share in the first 10 minutes, the price at close healthily exceeded the NYSE’s Monday pre-debut forecast of $132.

That positions Spotify as the eighth largest public offering for a tech company just behind Google in 2004 and Snap last year, which were valued at $27.2 billion and $28.9 billion respectively, according to Dealogic.

Alibaba secured the highest ever first-day valuation with a whopping $233.89 billion in September 2014.

By skipping the traditional IPO route, Spotify doesn’t have to pay underwriters, allowing maximum return for its existing investors. It also frees up company insiders from any lockup period restricting them from selling their shares following the listing.

Hence why other technology entrepreneurs have been watching CEO Daniel Ek’s approach intently.

“The takeaway is that if [the direct listing] is successful, and Spotify is able to raise the amount of capital they think they can, other entrepreneurs will consider this,” says Jay Sukits, a finance professor at the Joseph M. Katz Graduate School of Business at the University of Pittsburgh.

“Tech founders will see that they can walk away with all of the capital, and don’t necessarily have to pay an investment bank to take them public. That’s a big deal.”

Tech founders will see that they can walk away with all of the capital, and don’t necessarily have to pay an investment bank to take them public.

Prior to listing, Santosh Rao, the head of research at Manhattan Venture Partners — which has invested in the company in the secondary market — expected Spotify’s strategy to pay off and be an example for others to follow.

“If this is a successful listing, I can see Airbnb doing it, Uber doing it,” he told Bloomberg. “But Uber and Airbnb are much bigger scale.”

Having pioneered music streaming — the largest segment in the music industry in the US – Spotify is in a strong position.

It has amassed 71 million paid subscribers globally (46% increase in 2017), and is aiming for 96 million by the end of the year.

Its revenue increased 39% year-on-year in 2017, totalling roughly $US5 billion, according to its filing.

The challenge going forward for the company is that tech giants Apple, Google and Amazon are nipping at its heels, and it’s still not profitable.

It has lost more than $3 billion since it was launched 10 years ago.