Spotify Goes Public
SPOTIFY GOES PUBLIC
Gigantic music-streaming service will join the NYSE in 2018
By: Sam Eeckhout
The Swedish-based streaming platform, Spotify, confirmed a frenzy of rumors that the company will be going public. When, remains to be determined, but the company has crossed the t’s and dotted the i’s on the official legal paperwork. Trading under the symbol “SPOT”, Spotify will go unconventional, using a very specific process called a ‘direct listing’, instead of the traditional IPO process.
What this means: This is a rare move. In fact, it's so rare that the NYSE had to change their rules to accommodate the move. Spotify will become the largest and most high profile company to proceed with a direct listing over an IPO. With already a large pool of funds and an established brand, they will avoid many of the legal steps and fees associated with an IPO, simply because they can afford to. The company will not be raising new funds, but will instead start trading what existing shares they do have on the public market.
Why this matters: Going the direct listing approach means volatility and extreme spikes in the stock. Privately valued at around 8.5 billion, with total users reaching upwards of 159 million, this is a big leap for the mega-company. Despite its popularity, the company has been unable to turn a profit, with a net loss close to $600 million in 2016. Faced with pretty crippling loan repayments if they don’t go public, they will have high expectations from investors. This could mean the beginning of major releases on the website requiring extra payment, or other revenue generation ideas that might not be favourable with users. With Apple Music potentially surpassing Spotify in paid subscribers by the Summer, this is a pivotal play for Spotify. As large a company as they are, their margins are slight because of licensing fees. If this move is successful, it would ultimately be a massive win for the company and its major shareholders.