Published: Wed, April 04, 2018
Money | By Armando Alvarado

Spotify founders enriched to the tune of US$5.8b in listing

Spotify founders enriched to the tune of US$5.8b in listing

A trading post sports the Spotify logo on the floor of the New York Stock Exchange on April 3.

This represents a 12 per cent increase from the initial reference price of $132.

At the closing price, Spotify was valued at $26.5 billion - three times its last valuation when it raised $400 million in 2015.

"Normally, companies don't pursue a direct listing". By comparison, internet radio station Pandora Media's market value stands at $1.2 billion almost seven years after that company went public.

Since launching its service a decade ago, Spotify has overcome resistance from big record labels and some major music artists to transform how people listen to music. "Spotify is hemorrhaging from the costs of licensing content", Michael Carvin, chief executive of personal finance technology firm SmartAsset, explained.

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Spotify has 71 million so-called premium subscribers, including users who have given the company a credit card number for a free trial. "Even though Spotify's scale is about twice that of Apple Music, Apple has a huge ecosystem of products to market to".

By comparison, Apple's almost 3-year-old music streaming service has 38 million subscribers. Jeff Bezos has Amazon Music Unlimited with 16 million paying subscribers. That means the company's first public share price, the open price, was set based purely on supply from existing shareholders wanting to sell stock and demand for those shares.

Spotify's debut was unusual in that it was the NYSE's first direct listing. More than 91% of the proposed 178 million shares are traded, which is a much higher percentage than the original stock market's initial offering.

Spotify's opening act on Wall Street struck a chord with investors betting the unprofitable company's trend-setting music streaming service will maintain its early lead over Apple and other powerful challengers.

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