Spotify Is Finally Going Public but Its Shares Won’t Have a Set Price

The Swedish company is bypassing the traditional IPO process in which banks act as underwriters of a stock. That means the price of its shares could be extremely volatile.

  • Spotify filed the paperwork to list shares on the New York Stock Exchange.
  • The company is planning to do a “Direct IPO” which bypasses the typical Wall Street process.
  • Spotify is the largest music streaming service with 71 million paid suscribers.

Spotify has filed paperwork for a direct public offering, a risky and unusual process to quickly list its shares as it races with Apple to become the de-facto standard in the fast growing music streaming business.

The 10-year-old Swedish company filed an F-1 prospectus with the SEC on Wednesday for the offering. Spotify plans to list shares on the New York Stock Exchange under the ticker “SPOT.”

Spotify pioneered the music streaming business, which has overtaken digital downloads, as well as the ravaged CD business, to become the largest segment of the music industry in the US.

With 71 million paid subscribers, Spotify is currently the world leader, but it is facing stiff competition from Apple, whose three-year old Apple Music service has already racked up 36 million subscribers. Google and Amazon are also pushing their own streaming music services.

That competition has forced Spotify to spend heavily on music licensing, to maintain a broad catalog of music, as well as on marketing and R&D. The spending has resulted in hefty and growing losses. In 2017, Spotify said it had a net loss of €1.2 billion ($1.5 billion USD), compared to a net loss of €539 million the year before.

The company’s revenue increased 39% year-on-year in 2017, totaling roughly €4.1 billion, or $5 billion.

Spotify is offering its shares directly to investors, bypassing the typical Wall Street process where banks are hired to find buyers for the shares. Its F-1 filing listed a valuation of $1 billion, though that figure is likely a placeholder number that could change as the offering gets closer.

The direct IPO means that Spotify will sell shares without a set price, without a set level of supply of shares, and without a lock-up on existing investors. And the lack of the so-called “bookbuilding” process typically handled by underwriters means that Spotify’s stock won’t have a safety net if investors turn sour on the company.

“The public price of our ordinary shares may be more volatile than in an underwritten initial public offering and could, upon listing on the NYSE, decline significantly and rapidly,” Spotify warned in its prospectus.

This post originally appeared on Business Insider.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

Read Next


Latest

Google Wanted to Know What What Makes a Manager Great, so It Conducted a Study. Here Are the Results

20 years ago, you probably would've laughed if someone said your life would one day be irrevocably changed by a company called Google. What's a google?But, as you know, Google's become the largest entity in one of... (contd.)

Your Guide to Innovating Like Amazon: Focus on Inspiring People

Innovation is imperative for long-term success, but most companies struggle to maintain an innovative approach over the long haul.Innovation ultimately is driven by the individual people inside the organization, and it requires personal investment. If... (contd.)

How to Hook Your Audience Within the First 60 Seconds

How you open and close your presentation decides everything.Nothing matters more for effectiveness.The internet is full of great ideas for how to open and how to close speeches. You'll be ahead of most speakers if you... (contd.)

Why Investing in Gender Equality is Crucial for Your Business’s Future

We just saw another International Women's Day come and go, and the interest in this 100-year-old holiday is greater than ever. For proof, just look to Google's Think with Google blog. According to Google's... (contd.)

3 Valuable Business Lessons You Can Learn From a Bicycle

I actually cannot recall where I first heard this, but it was many years ago, and it has stuck with me ever since. The story was that a student came to school on his... (contd.)
- Advertisement -
Join Our Daily Newsletter
Sign up to get all the business news and intelligence that matters straight to your mailbox.
Join Our Newsletter !
Like This Article? Subscribe To Our Newsletter To Receive More Of Them Straight In Your Inbox
Contact Us.
Your Name
Email
Message
     
Thank you for your interest in Inc. Arabia. Please leave your contact details below, and we'll be in touch with you very soon.
Like This Article? Subscribe To Our Newsletter To Receive More Of Them Straight In Your Inbox