Spotify goes public, valued at $26.6 billion
In a unique IPO approach, Spotify is going the direct listing route instead of traditionally selling its shares on the stock market. On April 3, Spotify listed its shares on the New York Stock Exchange. They closed at $149.60, which is 12% higher from the initial reference price of $132 but down from the opening high of $165.90. Notably, Spotify was valued at $26.6 billion.
How is direct listing different from a traditional IPO
A direct listing allows shareholders to directly sell their shares to the public without an intermediary. So with a direct listing, Spotify won't raise additional capital but will provide existing shareholders with a chance to cash out quickly. There is no "lock-up" period like a traditional IPO and shareholders are allowed to sell their shares immediately after a company goes public.
Spotify will not raise additional money with the listing
"Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years. So the direct listing doesn't change who we are, what we are about, or how we operate," co-founder and CEO Daniel Ek said. Spotify is the biggest company to go public via a direct listing, a practice typical of smaller companies.
In private trading, Spotify's shares went up till $132.50
In private trading earlier, Spotify's shares traded between $90 and $132.50, which gave the IPO its initial reference price. The first trade didn't happen until halfway through the trading day (12:45pm ET) which set a record for the latest opening time for a public debut.
Spotify has raised $2.7 billion in debt and equity financing
Spotify has previously raised $2.7 billion in both debt and equity financing with Tencent, Tiger Global, Sony Music and Technology Crossover Ventures being its largest shareholders. While CEO and co-founder Daniel Ek owns 9% of the company, co-founder Martin Lorentzon owns 12.4%.
Spotify has never made a profit till date
The company claims to be present in 61 countries with 159 million monthly active users and 71 million premium subscribers. Although Spotify earned $5 billion in revenue last year, it ran close to $1.5 billion in losses. The company pays out over three-fourths of its revenue in royalties to labels, producers, songwriters, and artists. Spotify is yet to ever make a profit.
