Spotify uses coolness to warm up to potential listing investors
london/san francisco — Streaming music leader Spotify used its cultural cool factor to appeal to mom-and-pop investors in an unconventional presentation ahead of its April 3 stock market listing.
Led by 35-year-old chief executive Daniel Ek, wearing jeans, white t-shirt and a dark blazer, executives said Spotify would prioritise growth over profits to fend off big rivals Apple and Amazon.com, while also seeing a clear path to making money. Ek’s team made a direct case to individual investors in a public webcast instead of a traditional closed-door road show typically used to woo institutional investors in initial public offerings (IPOs).
The Stockholm-based company’s stock will hit the public markets in a direct listing without traditional underwriters. It must convince investors that its business is sound and that investors who buy shares in the public market debut will not be hurt by unexpected volatility.
“You won’t see us ringing any bells or throwing any parties,” Ek said. “Since Spotify isn’t selling any stock in the listing, we’re really entirely focused on the long-term performance of the business.”
The direct listing is critical to alleviating Spotify’s losses, which are driven by financing
You won’t see us ringing any bells or throwing any parties... we’re really entirely focused on the longterm performance of the business Daniel Ek, CEO of Spotify
costs, and will enable all latestage investors to convert debt holdings into equity.
Spotify’s revenue grew 39 per cent to €4.09 billion ($5.04 billion) in 2017 from €2.95 billion in 2016, it said in a securities filing. At the same time, net financing costs of €855 million pushed up operating losses to €378 million from €349 million. Chief financial officer Barry McCarthy, the former long-serving CFO of streaming video giant Netflix, said Spotify’s strategy was to prioritise growth before shortterm profitability, and that greater scale would enable profit margins to swell.
With 71 million subscribers at the end of 2017, Spotify is the leader in streaming music. It also has 92 million users of its free, advertising-supported service, which it says delivers a constant stream of converts to its paid offering. That will keep it ahead of Apple, it believes.
Tomas Otterbeck, an equities analyst with Swedish research firm Redeye, said he was impressed by McCarthy repeating the idea that “We are playing a market share game” and that Spotify could reach 100 million paying subscribers by early next year.”