Spotify goes public, IPO values company at $23 billion
The company, which intends to trade under the ticker name 'SPOT' on the NYSE, faces significant challenges to its business model, including risk from fluctuating and unpredictable royalty rates it pays to music labels and songwriters.
Spotify has made it official—the streaming giant announced on Wednesday that it is officially going public, reports CNBC. The often controversial music streaming service intends to trade on the New York Stock Exchange (NYSE) under the ticker name “SPOT”.
Although Spotify’s debut on the NYSE is being called an Initial Public Offering (IPO), but it’s not an initial public offering in a traditional sense. Instead, Spotify is undertaking a rare “direct listing,” which means there’s no fixed number of shares for sale and, as Spotify explains in the filing, the price could rise or fall more dramatically than normal.
The company offered some guidance in its filing based on private share sales — some of which have traded as high as $132.50 on the private market — which value the company at close to $23 billion. According to the CNBC report, the company is targeting a $1 billion IPO.
In the 10 years of Spotify’s existence, it has proven to be the leader in streaming music services globally, with the company reporting 71 million paying premium subscribers and more than 159 million monthly active listeners as of December 2017. It is available in 61 countries and territories. Its closest competitor, AppleMusic, is far behind at 36 million subscribers.
According to Spotify's filings, the company generated close to $5 billion in revenue in 2017 but saw its operating loss exceed $460 million. The filing also notes that Spotify has paid more than $9.77 billion to rights holders over the course of its 10-year existence.
The company faces significant challenges to its business model, including risk from fluctuating and unpredictable royalty rates it pays to music labels, publishers, and songwriters. The company is also no stranger to criticism from artists as to how it’s unfair in terms of handing out royalties. Radiohead’s Thom Yorke, The Black Keys’ Patrick Carney, Talking Heads vocalist David Byrne and Taylor Swift have all voiced their concerns against the streaming service with Yorke and Swift retracting their music from Spotify temporarily.
So while some Twitter users were enthusiastic about the news, others remained critical:
So @spotify is filing for an IPO with the $SPOT ticker symbol. In the very first Spotify office, the tech department had two unofficial mascots, Spot and Iffy, posted on the door. Both were pencil drawings, crudely drawn by yours truly.— Magnus Hult (@hult) February 28, 2018
"We set out to reimagine the music industry and to provide a better way for both artists and consumers to benefit from the digital transformation of the music industry,” addressing these issues and envisioning the business model for the future. "Spotify was founded on the belief that music is universal and that streaming is a more robust and seamless access model that benefits both artists and music fans.”
Spotify said that it would list "as soon as practicable after this registration statement is declared effective."
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