Published: Wed, April 04, 2018
Research | By Derrick Holloway

Spotify's market value hovers at around $29 billion

Spotify's market value hovers at around $29 billion

It, along with other notable music streaming services, have changed the way the music industry makes money by giving users access to large libraries of music.

The share sale of Spotify, the Swedish music streaming service, got off to a bum note on Tuesday morning after the New York Stock Exchange hoisted the Swiss, not the Swedish, flag outside its historic building to celebrate the deal.

Money reports that this could end up being a bad move for Spotify once it goes public as a bunch of shares hitting the market at once could bring the stock price down. It's using a "direct listing" on the New York Stock Exchange that will allow the company's early investors and employees to sell as many shares as they want whenever they want.

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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.

Where will the Spotify stock symbol open at?

Today marks Spotify's entrance into life as a publicly-traded company, and how things go might very well dictate what the IPO market looks like going forward...blah blah blah. Experts warned of some major volatility though due to Spotify's unusual 'direct listing'. And it believes it has more than twice as many paying customers as its closest competitor, Apple Music according to SEC filings.

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Global recorded music industry revenue in 2014 had fallen by 40 percent to $14.3 billion from $23.8 billion in 1999, when the rise of music file-sharing service Napster ravaged sales of CDs. Instead, company insiders and investors will be selling their existing stock. "Spotify has been the driving force in nothing less than a turnaround in the United States recorded music industry". The opening price puts the company's value at almost $30bn, making it one of the largest USA listings for a tech company in history. Almost 91 percent of Spotify's 178 million shares were tradable, a much higher percentage than typical in a traditional IPO. Spotify subscriptions, meanwhile, are growing by an average of 2 percent per month. That could make it even more hard for investors to settle on the right price for Spotify's stock, they say. It entered the NYSE with a reference price of $132, so Tuesday was much higher than that.

Analysts had anxious ahead of Spotify's direct listing that forgoing hiring investment banks as underwriters or holding traditional promotional events with institutional investors could mean volatility once formal trading kicked off.

"In normal IPOs, the underwriters stabilize the price - they put a floor under the price below which the stock price won't fall, because the underwriters will buy it at that price".

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