Nordic sober - Spotify ventures unusual IPO
Spotify celebrates a double premiere on Wall Street: The shares of the music streaming service appeared on the price boards on Tuesday with an opening price of 165.90 dollars. The company chose the route of a direct placement - a first in the history of the US stock exchange Nyse.
Unlike a traditional IPO, the securities were not offered to investors in advance and an issue price was determined based on interest. This saves Spotify millions in fees for consultant banks.
The Swedish company's debut price was calculated from buy and sell orders after the start of trading on Wall Street. As a benchmark for investors, Nyse had set the reference price for Spotify shares at $132.
Experts reckoned that if successful, the multibillion-dollar direct placement would likely serve as a blueprint for other, as yet unlisted tech companies such as Uber and Lyft to use in their new issues.
Spotify CEO Daniel Ek played down the significance of the stock market debut in advance. It puts the company on the big stage, but "it doesn't change who we are, what we're about, or how we do things.
Ek did not want to raise expectations too high. "I have no doubt that there will be ups and downs," the Swede wrote in the company blog. "Sometimes we succeed, sometimes we stumble."
No profit
Spotify, which remains in the red, has already come a long way. The Stockholm-based company, which has been on the market for ten years, is keeping the big technology groups such as Apple, Google and Amazon at bay with its competing offerings. In addition, Spotify has succeeded in helping to shape the change in the music industry.
For a long time, the industry suffered from the fact that fewer and fewer people were buying CDs. Now, according to market estimates, 60 percent of all music sales come from streaming services, where users take out subscriptions to access huge music libraries.
The reference price for Spotify set by Nyse was $132 per share, valuing the company at a total of $23 billion. "Judging by gray market trading and supply and demand, this should be a fair price," a trader said.
With a direct placement, the usual price formation process organized by banks is eliminated in advance, which also creates volatility.
Not a normal company
Spotify is no ordinary company, said 35-year-old co-founder Ek, explaining the special path to the stock market that no one on the Nyse has taken before. There was no advertising tour to investors to pitch the shares, nor was there a subscription period or issue price. This saves time and money, but is also risky.
Added to this was the uncertainty caused by the recent weak market environment. Technology stocks have been among the big losers since the data scandal at Facebook and US President Donald Trump's criticism of Amazon. However, on Tuesday everything pointed to a recovery. At the start of trading, the Dow Jones gained 0.5 percent.
After Snap, Facebook and Alibaba, Spotify is one of the biggest stock market debuts of tech companies on Wall Street in recent years. The debut of the world's largest Internet network in 2012 was more than bumpy - partly due to technical problems. Nevertheless, Mark Zuckerberg's company has more than quadrupled its stock market value since then. Spotify initially indicated the amount of up to one billion dollars as a placeholder in the issue proceeds. By comparison, Facebook ended up collecting $16 billion. (SDA)
