Spotify Files To List Shares, Valuing Itself At More Than $23bn

Spotify has filed for a direct listing of shares on the New York Stock Exchange (NYSE), in a move it said could value the company at more than $23 billion (£17bn).

At that price, the listing would represent one of the largest market debuts of a tech company in recent years. That prominence reflects the emergence of streaming services as the future of digital music, rapidly eclipsing digital downloads.

Spotify’s direct listing gives existing shareholders a way to cash in, but doesn’t seek to raise new funds, as would occur in a conventional initial public offering. As a result, Spotify didn’t specify an initial price for shares.

The company’s disclosures about share trade prices in February and 178 billion estimated outstanding shares value the company at between $16.8bn and $22.5bn.

Music streaming leader

In a conventional flotation, investment banks would be brought in to underwrite a firm’s shares, providing an initial period of price stability. That means Spotify’s shares could see significant volatility when they begin trading.

Spotify, the largest music streaming company, launched in 2008 and offers its service in more than 60 countries, with 159 million monthly active users and 71 million paid subscribers.

Those figures are well ahead of its rivals, with Apple, its closest competitor, having 36 million subscribers.

Amazon follows with 16 million and Pandora has 5.48 total subscribers. Google hasn’t disclosed its subscription figures.

But Apple, Amazon and Google all have their substantial businesses elsewhere, and use music to draw people to their core offerings, something Spotify acknowledged in its regulatory filing.

Stiff competition

“Many of our competitors enjoy competitive advantages such as greater name recognition, legacy operating histories, and larger marketing budgets, as well as greater financial, technical, human, and other resources,” Spotify said.

Apple, Amazon and Google also offer widely used software and hardware platforms, including computer systems, smartphones and smart speakers, giving them ways to reach users that Spotify can’t match.

And yet, in the ten years since the launch of its service the Swedish firm has successfully challenged those well-established competitors, with revenues that are rising faster than its operating costs, according to its filing.

Revenues rose 39 percent from €2.95bn (£2.62bn) in 2016 to €4.09bn last year, while operating losses rose from €349m to €378m. Spotify said it has paid more than €8bn in royalties to performers, music labels and publishers since its launch.

‘Universal’ appeal

Churn rates, which measure cancellations, have fallen, while the amount of time users spent listening increased.

The company has licensing deals with the three biggest record labels, Warner, Universal and Sony. Its largest area is Europe, with 58 million monthly active users, followed by North America. Latin America and other parts of the world are growing markets, Spotify’s filing said.

Its advertising-supported streams, a feature not offered by Apple, could gain listeners from terrestrial radio, Spotify said.

Spotify compared itself to companies such as Facebook and YouTube that are able to appeal to a broad range of users.

“We believe the universality of music gives us the opportunity to reach many of the over 3.6 billion internet users globally,” the company said.

Spotify didn’t estimate when it expects the NYSE listing to take place.

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