Spotify finally goes public with a valuation of almost $24 billion


Spotify lost about $1.5 billion in 2017, more than double its loss from the prior year.

Spotify will nonetheless be closely watched as it starts trading as the market weighs whether to believe that the company - big in cool factor but short on profit - has a rosy future. Spotify kicked off trade at $165.90 and was down 3% at $160.50 in recent trade, after hanging around a range between $167 to $170, as holders of the stock tried to arrive at a price to kick of trade and market makers gauged overall demand. It had 71 million paid subscribers as of December 31 and 157 million monthly active users.

A $10,000 investment in Netflix's 2002 initial public stock offering would now be worth more than $2.6 million, leaving some investors wondering if Spotify might be on a similar trajectory in music streaming.

The company filed papers with the US Securities and Exchange Commission to go public in late February.

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

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Spotify's opening public price was determined by buy and sell orders collected by the NYSE from broker-dealers.

"One of the things that is driving a lot of the uncertainty, this range of valuations, is that the company is highly unprofitable, has a lot of major competitors and has few direct public peers", Matthew Kennedy, an analyst at IPO research provider Renaissance Capital, told CBS Moneywatch.

Unlike a traditional IPO where employees don't sell shares for months, known as a "lock-up", Spotify insiders are already allowed to sell. Instead of paying more than $65 million in fees to Wall Street investment banks, Spotify will likely pay half as much, market analysts said. The company's management said the firm didn't actually need to raise money, like most companies that IPO do.

Smooth early trading dispelled market worries that Spotify's New York Stock Exchange debut might be marred by volatility, given the company's choice to ditch Wall Street underwriters and other safeguards of a traditional initial public offering. "Spotify has been the driving force in nothing less than a turnaround in the USA recorded music industry". The company is using a so-called direct-listing process. If it were a typical IPO, they'd have to wait for a share lockup period to end to sell their stock. 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. That basically just means that it isn't issuing new shares for the listing, and as a result, it hasn't priced its stock ahead of time.