The music-, podcast-, and video-streaming company Spotify took a historic step as the company completed a direct listing, bypassing the traditional initial public offering and ditching Wall Street underwriters.
According to Reuters, the direct listing was the largest ever.
Spotify shares opened at $165.90, giving the Stockholm-based company a market value of almost $30 billion. It was a 26 percent increase from the reference price set by the New York Stock Exchange on Monday at $132 a share. As reported by Reuters, some investors had expressed concerns about company costs and being able to compete with the likes of Apple.
Spotify’s market debut matches the performance of social media company Snap Inc. The social media platform went public a year ago, joining Facebook and Alibaba Group Holding Ltd as recent stock listings.
As a music-streaming service, Spotify has had to overcome plenty of obstacles and resistance from record labels, not to mention opposition from music artists.
It has after a decade presented a business model that transformed how the music industry makes money. To date, the platform has 71 million premium subscribers. Apple, on the other hand, has 46 million on its music service.
“Investors are right to have some reservations. Spotify is hemorrhaging from the costs of licensing content,” Michael Carvin, chief executive of personal finance technology firm SmartAsset, explained. “Even though Spotify’s scale is about twice that of Apple Music, Apple has a huge ecosystem of products to market to.”
Why a direct listing:@Spotify believes that their recognizable brand, global scale, business model, and transparent culture will lead to a great company where the stock price takes care of itself (NYSE: $SPOT) pic.twitter.com/C7wuCP3rWp
— NYSE (@NYSE) April 3, 2018
Spotify is not only competing with Apple in this space. Jeff Bezos has Amazon Music Unlimited with 16 million paying subscribers. Another service in the same line of business is Pandora, which has 5.48 million total subscribers.
Spotify went public today. Shares were expected to start trading around $130 each, but ranges for the opening price went as high as $169. https://t.co/8ppkW7i0E7
— NPR (@NPR) April 4, 2018
A New York Times article confirmed that the first day of trading was a success and Spotify finished with a valuation of $26.5 billion. The share price closed at $149.01, still above the reference price.
Daniel Ek, Spotify’s co-founder and chief executive, added in the Times report that the manner in which they went public reflected the company’s self-image as a disrupter in the industry.
— Forbes (@Forbes) April 3, 2018
“Normally, companies ring bells. Normally, companies spend their day doing interviews on the trading floor touting why their stock is a good investment,” Mr. Ek said in a statement Monday. “Normally, companies don’t pursue a direct listing.”