Investors bet on Spotify in debut

GOOD VIBES::The showing left Spotify’s market value among the 10 highest ever registered by a technology company after their first day of Wall Street trading


Thu, Apr 05, 2018 - Page 10

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

After several hours of anticipation on Tuesday morning, Spotify’s shares traded as high as US$169 in their stock market debut before falling back slightly.

The stock closed at US$149.01 — well above its previous high of US$132.50 in deals worked out during Spotify’s 12-year history as a privately held company.

The stock market’s warm welcome left Spotify with a market value of about US$27 billion, financial data company FactSet said.

By comparison, Internet radio station Pandora Media Inc’s market value stands at US$1.2 billion nearly seven years after that company went public.

The performance left Spotify’s market value among the 10 highest ever recorded by a technology company following their first day of US trading, analytic firm Dealogic said.

Chinese e-commerce company Alibaba Group Holding Ltd (阿里巴巴) holds the top spot at US$234 billion after its market debut in 2014.

Spotify chief executive officer Daniel Ek, who founded the company, emerged as the day’s biggest winner. His 27 percent stake in the Swedish company is now worth US$7.4 billion.

The good vibes surrounding Spotify stem from its early lead in music streaming — a still-evolving field trying to hook people on the idea that it is better to subscribe for online access to millions of tunes than to buy individual albums and singles.

Spotify has attracted 71 million subscribers worldwide so far and is aiming to increase that number to as many as 96 million subscribers by the end of the year. It has 159 million total users, including people who are willing to listen to ads for access to free music.

By comparison, Apple Inc’s nearly three-year-old music streaming service has 38 million subscribers.

A list of other formidable competitors, including Google and Inc, also offer similar music streaming services, raising the specter of Spotify being wiped out by far richer rivals.

Apple, Amazon and Google have amassed a combined US$402 billion in cash compared with Spotify’s 1.5 billion euros (US$1.84 billion).

Spotify’s success has drawn comparisons to Netflix, which pioneered DVD-by-mail rentals and then video streaming to create a hugely successful, subscription-driven franchise that has produced spectacular investment returns and has minted the company with a market value of US$122 billion.

Spotify and Netflix also have a common executive in their lineage. Spotify’s chief financial officer, Barry McCarthy, held the same job when Netflix went public and remained in that position until leaving the video service in 2010.

Unlike Netflix, Spotify still is not profitable, having lost more than 2.4 billion euros since it started more than a decade ago.

After losing 1.2 billion euros, Spotify has also made it clear that it intends to remain focused on adding more subscribers instead of making money for now.