Spotify AB has filed a Form S-1 with the Securities and Exchange Commission to offer stock on the New York Stock Exchange. According to sources familiar with the listing, Spotify plans to offer shares in March or April of 2018. This is the most recent major advance in Spotify’s business activity, as it plans to make its offering through a direct listing. Direct listings vary from initial public offerings in that they are not made with intentions to raise money from the public, and thus do not require underwriters.
Spotify was most recently valued at approximately $20 billion, at the time of a share swap between Spotify and Chinese web company Tencent Holdings Ltd. Note that this valuation may vary from how public investors will value Spotify, although a $20 billion public valuation would make Spotify one of the biggest tech companies to list on a U.S. market since Facebook. Spotify has experienced tremendous growth over the years; the audio streaming company was valued at $8.5 billion as of a private capital injection in 2015, reaching roughly $20B by the end of 2017.
If the offer goes well, other major startups (such as Airbnb) could follow suit by pursuing a direct listing.
Toward the end of last year, Spotify was allowed by the SEC to push ahead with a direct listing on the NYSE. The SEC had worries that Spotify’s direct listing could allow businesses with potentially volatile and risky financial profiles to offer shares in the public market without giving investors the protection they need.
Founded in 2008, Spotify gives customers subscription-based access to a library of more than 30 million songs. Premium users who pay $9.99 a month can listen without advertisements between songs and can access any song in the Spotify library on-demand. Spotify said it has 140 million active listeners globally, 60 million of whom are Spotify Premium subscribers, as of June 2017.
But how has Spotify been performing over the years? Spotify has revealed struggling revenues, showing losses over several years since its founding. The direct listing creates an opportunity for private investors to exit their stakes in Spotify and is not for raising additional funds. Public investors will have the capacity to purchase shares once Spotify is publicly listed.
What do you think?
- Do you think investing in Spotify is a good idea? Why or why not?
- Spotify has faced several copyright-infringement lawsuits by artists and publishers, including one that is seeking $1.6 billion in damages. Do you think this could affect the timing of Spotify’s debut? Why or why not?
- What could be the downsides of a direct listing, such as the one being planned by Spotify?