Spotify makes $37 billion debut
Spotify's opening act on Wall Street struck a chord with investors betting the unprofitable company's trendsetting music streaming service will maintain its early lead over Apple and other powerful challengers.
After several hours of anticipation yesterday, 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 stockmarket's warm welcome left Spotify with a market value of about US$27 billion ($37b), according to FactSet. By comparison, internet radio station Pandora Media's market value stands at US$1.2b 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, according to Dealogic. Chinese e-commerce company Alibaba Group holds the top spot at US$234b after its market debut in 2014.
Spotify chief executive Daniel Ek, who founded the company, emerged as the day's biggest winner. His 27 per cent stake in the Swedish company is now worth US$7.4b.
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, which in its listing documents took credit for helping launch the career of Kiwi pop star Lorde, has attracted 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. It has 159 million total users, including people who are willing to listen to ads for access to free music.
Spotify's success 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 produced spectacular investment returns and has minted the company with a market value of US$122b.
Unlike Netflix, Spotify still isn't profitable, having lost more than
2.4b ($4b) since it started more than a decade ago. After losing 1.2b, Spotify has also made it clear that it intends to remain focused on adding more subscribers instead of making money for now. — Associated Press