The world's largest streaming music provider began public trading today on the New York Stock Exchange under the symbol SPOT. The company says that in 2018, shares traded on the private markets between $90 and $132.50. The initial reference price on released by the New York Stock Exchange late Monday evening was $132.
If successful, Spotify could become a roadmap for the array of multi-billion dollar tech companies, investors are now hoping will go public soon, including Airbnb, Lyft and Uber.
While pressure is on to pay higher royalties to music creators, Spotify has made inroads with artists. Here's a piece outlining all you need to know about Spotify's public debut.
The Associated Press reports that Spotify competitor Pandora is valued at $1.2 billion, and that the streaming service has been compared to having the growth potential of Netflix which is worth about $122 billion.
In lieu of a traditional initial public offering, Spotify used what's known as a direct offering - something it described as a "novel method" for going public.
Spotify's Ek acknowledged before the listing that it could be a volatile ride for the company. In its filing to go public, Spotify noted that it had roughly twice the number of paying subscribers as its next closest rival, Apple.
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Apple said subscriptions have maintained a monthly growth rate of 5 percent and they have 36 million subscribers in the United States.
Ek said his company chose to skip the IPO phase because he wasn't interested in "the pomp and circumstance".
Spotify Technology SA also is making its Wall Street debut in an unconventional way. The decision to direct list the stock instead of performing an IPO came as a surprise to many in the finance sector and could signal a new era of Wall Street reform. Almost 91 percent of Spotify's 178 million shares were tradable, a much higher percentage than typical in a traditional IPO.
"While this is obviously a big day and I'm very proud of my employees, I really just feel like we're in the early days, not celebrating the end days as so many other companies are doing", Ek said.
Traditionally, when a company wants to enter the stock exchange, banks are contacted to drum up investors and stabilize a price point.
Analysts had anxious ahead of Spotify's direct listing that forgoing hiring investment banks as underwriters or holding traditional promotional events with institutional investors could mean volatility once formal trading kicked off.
"If the stock is choppy when it takes off the stabilization agent attempts to create a floor of where the stock price could go", said Lise Buyer, an IPO consultant with Class V Group in Silicon Valley.