Spotify strikes chord with debut on wall street

Spotify picked SAN FRANCISCO up more fans on Wall Street on Tuesday as investors gave the unprofitable company a warm welcome in its stock market debut.

After several hours of anticipation, Spotify’s shares traded as high as US$169 before falling back slightly. By the early afternoon, the stock was still hovering around US$155 — well above its previous high of US$132.50 in deals worked out during Spotify ’s 12-year history as a privately held company. It closed at US$149.01, down from an opening price of US$165.90.

The stock market’s rousing reception left Spotify with a market value of about US$29 billion, according to FactSet. By comparison, internet radio station Pandora Media’s market value stands at US$1.2 billion nearly seven years after that company went public.

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’s better to subscribe for online access to millions of tunes than to buy individual albums and singles. Spotify has struck a chord with 71 million worldwide subscribers so far and is aiming to increase that number to as many as 96 million subscribers by the end of the year.

By comparison, Apple’s nearly three-year-old music streaming service has 38 million subscribers. A list of other formidable competitors that includes Google and Amazon also offer similar music streaming services, raising the spectre of Spotify being wiped out by far richer rivals.

Spotify’s early lead in music streaming has drawn comparisons to Netflix, which built upon its pioneering role in DVD-by-mail rentals and then video streaming to create a hugely successful, subscription-driven franchise that has a market value of US$122 billion.

But unlike Netflix, Spotify still isn’t profitable, having lost more than 2.4 billion euros (US$3 billion) since it started more than a decade ago. Spotify has also made it clear that it intends to remain focused on adding more subscribers instead of making money for now.

Spotify Technology SA is using a “direct listing ” that will allow the company’s early investors and employees to sell as many shares as they want whenever they want.

The direct listing could result in wild swings in Spotify ’s stock pricing during the first few days of trading, especially since Spotify’s shares sold in a range of US$48.93 to US$132.50 in privately negotiated transactions during the first 11 weeks of this year.