Spotify soars in its trading debut despite rocky market

Junge Junge

Junge Junge & Valentine – Catch 22 Nick Watts

On Tuesday, April 3rd, dominant music sharing application Spotify began its first official day of being traded as a public entity.

Spotify Technology SA on Tuesday completed the largest-ever direct listing, valuing the world's leading streaming music service at as much as $30 billion, but its shares stalled after an early spike.

The direct listing was a test case for other companies tempted to list without selling new shares, and for bankers that could lose out on millions of dollars in future underwriting fees.

The NYSE had set a reference price of $132 and indications pointed to shares trading as high as $155.

On the eve of the public offering, Spotify CEO Daniel Ek touted the decision to avoid the usual fundraising and fanfare of an IPO as an example of the company thinking different.

"I have no doubt that there will be ups and downs as we continue to innovate and establish new capabilities", Ek said in a blog post Monday evening.

Additionally, while traditional IPOs feature executives on the trading floor to ring the bell and speak with reporters on why the stock is a worthy investment, Spotify's team was absent from the NYSE.

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By comparison, Spotify expects its audience could top 200 million monthly users by the end of this year, with as many as 96 million of them paying for the service, according to a regulatory filing.

John Tinker, analyst at Gabelli and Co., kicked off assessments of Spotify by rating it a hold - advice neither to buy nor sell. Others argue that Spotify could be viewed as a Netflix, which has been successful in entertainment licensing agreements.

Spotify has positioned itself as a key contributor to the reversal of the music industry's decline, by convincing millions of people to pay for an on-demand music subscription service. With the United States also set to tighten its H1B policies which will make it hard for the tech companies, the recipe is complete for the companies to feel the pinch and this has been placing the pressure on the stock markets.

The NYSE has listed Spotify ($SPOT). Apple Inc.'s music-streaming business and Amazon.com Inc.'s are also viewed as competitors to the Stockholm-based Spotify, which officially launched its business in 2008. "Spotify has been the driving force in nothing less than a turnaround in the U.S. recorded music industry".

In the long-run, Spotify's performance in the stock market will largely depend on its business performance and outlook.

Listen, this whole direct listing thing is definitely making Wall Street's butthole clench, and the hot-takes will be flying in at least one direction when we figure out what this company is actually worth because this is a fun new exercise in bullshit. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company.

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