Spotify soars in its trading debut despite rocky market

Microsoft Senior VP of Entertainment Music & Gaming Jason Rutherford during a media presentation in Redmond WA. March 30th 2018

As of January, Spotify had more subscribers than its closest competitors, with 70 million to Apple Music's 36 million paying subscribers.

Spotify warned last week that its sales growth was likely to slow this year, but that it still expected to post a narrower annual loss. Instead of issuing new shares, the company is opening up the already-existing shares that have been owned privately to allow current shareholders to sell their stock to the general public.

The company traded between $48.93 and $132 a share over the past year through private transactions. The company says it is present in 61 countries and its platform includes 159 million monthly active users and 71 million premium subscribers. "It opens the door to any unicorn out there that focuses on the consumer", Nicholas Colas, cofounder of DataTrek Research, said.

The public listing came after more than three hours of discussion among traders who struggled to set a price of the company: according to reports, it's the latest open for a NYSE-listed stock ever, beating out retail giant Alibaba which began trading just before noon in 2014.

The growth was nearly entirely attributable to the public's embrace of streaming, with subscriptions to paid platforms such as Spotify, Apple Music, Tidal and the new service of retail giant Amazon growing 56 percent to 35.3 million users.

Spotify went public on Tuesday through a so-called direct listing.

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Spotify laid out a number of reasons for listing its shares via a direct offering, including providing equal access to all buyers and sellers.

Its Wall Street debut has been closely followed in recent weeks as much for the unconventional approach to a public offering it chose as for the company itself. Spotify is going public at a time when there is pent-up demand for new tech IPOs.

"Spotify has been the driving force in nothing less than a turnaround in the United States recorded music industry", Verna said.

The direct listing also bypasses another Wall Street tradition: Offering shares of an IPO to hedge funds and other preferred investors at a discount, said Jay Ritter, a business professor at the University of Florida, who tracks IPO data.

John Coffee, director of corporate governance at Columbia University told the CBC News that if the company had listed via an IPO, it would have to pay seven per cent of the proceeds to underwriters. This is because in its 12 years of existence, the company costs are far greater than its revenues and as much as that gap is narrowing, there is no assurance that Spotify can become truly profitable. The only problem was, they rose the flag of Switzerland instead. Spotify subscriptions, meanwhile, are growing by an average of 2 percent per month.

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