The music streaming company made its debut on the New York Stock Exchange overnight. Shares opened at US$165.90, up almost 26% from the $132 guide price set by the New York Stock Exchange on Monday.
After reaching a high of $169, shares closed at $149.01 — 13% higher than its reference price on its first day of trading.
Founded in 2006 as a free-to-use service funded by advertising, Spotify is now the leading music streaming service. It has more than 159 million monthly active listeners globally, with 71 million of those paying subscribers. Its closest competitor, Apple Music, only has 36 million subscribers, reported CNBC.
Spotify has positioned itself as a key contributor to the reversal of the music industry’s decline.
Spotify’s unorthodox approach
The digital music giant bypassed many traditional steps in listing as a public company. Trading under SPOT, they conducted a direct listing, cutting out banks completely. They even skipped the ritual of ringing the opening bell, reported the Chicago Tribune.
The Chicago Tribune reported that CEO and Founder of Spotify Daniel EK said at an investor day presentation last month,
‘For us, going public has never really been about the pomp or the circumstance of it all…so you won’t see us ringing any bells or throwing any parties. And despite the enormous respect I have for the New York Stock Exchange in this process, I also won’t be on the floor doing any interviews.’
The direct listing allows Spotify to avoid some of the frustrations that companies have when listing publicly. For instance, employees and investors are able to sell their shares immediately.
The Guardian reported that Spotify made a commitment to early backers that they would have the chance to cash in on their investment. The debut allowed Spotify to fulfil this promise and to expand the business.
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What can we expect to see from Spotify?
Spotify is still not profitable to this day. Last year they posted an operating loss of $461 million, as reported by Recode.
In order for them to be profitable, they need better margins, which they are confident they can do.
In many public listings, and the investors pitch last month, Spotify has spoken about becoming a ‘platform’. Insinuating they will not strike deals with big record labels, but instead directly with artists, thereby cutting costs.
It seems we can expect big things from Spotify. Let’s see if they can deliver.
For Money Morning
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