Spotify Is Truly The First Millennial IPO

Spotify has said it chose a direct listing because it doesn’t need to raise more money. It also says the process is fairer to investors

After a delay in early morning trading, Spotify opened on Wall Street at $165 per share - valuing the company at about $29 billion. As of this writing, Spotify's share price is trading at $160. The initial reference price on released by the New York Stock Exchange late Monday evening was $132. Unlike other companies who handle this process with the involvement of investment bankers, Spotify is not issuing any new stock.

Spotify's unusual approach required the 200-year old NYSE to change its rules and secure approval from the Securities and Exchange Commission. "Even though Spotify's scale is about twice that of Apple Music, Apple has a huge ecosystem of products to market to".

The opening public price was determined by buy and sell orders collected by the NYSE from broker-dealers and a designated market maker's determination of where buy orders could be matched with sell orders. By 1:30pm EDT, the Wall Street Journal was reporting that Spotify was now valued at $30 billion, meaning that this could prove to be the third-largest IPO ever after Alibaba and Facebook. Experts warned of some major volatility though due to Spotify's unusual 'direct listing'.

The growth was nearly entirely attributable to the public's embrace of streaming, with subscriptions to paid platforms such as Spotify, Apple Music, Tidal and the new service of retail giant Amazon growing 56 percent to 35.3 million users. The company's management said the firm didn't actually need to raise money, like most companies that IPO do. Apple Inc.'s music-streaming business and Amazon.com Inc.'s are also viewed as competitors to the Stockholm-based Spotify, which officially launched its business in 2008.




Today marks Spotify's entrance into life as a publicly-traded company, and how things go might very well dictate what the IPO market looks like going forward...blah blah blah. Instead, company insiders and investors will be selling their existing stock.

Spotify's IPO has been unconventional by most industry standards. Normally, companies don't pursue a direct listing. Spotify subscriptions, meanwhile, are growing by an average of 2 percent per month. "While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company", CEO Ek said.

Traditionally, when a company wants to enter the stock exchange, banks are contacted to drum up investors and stabilize a price point.

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 have sold in a range of $48.93 to $132.50 in privately negotiated transactions during the first 11 weeks of this year.

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