Spotify has filed for a direct listing of its shares, laying out financial data for the first time that cheered some analysts but led others to question how it could turn a profit from its growing subscriber base.
The music streaming service has already swayed the music industry, and listeners worldwide, with an online streaming service that makes millions of songs instantly available. Now, it is ready to put its business model to a test on Wall Street.
The company will start trading on the New York Stock Exchange under the ticker name SPOT. According to the company, shares have traded as high as $132.50 on private markets, which would give the company a valuation over $23 billion based on ordinary shares outstanding as of February 22.
Spotify, launched in 2008 and available in more than 60 countries, is the biggest music streaming company in the world and counts services from Apple Inc., Amazon.com Inc. and Alphabet Inc‘s Google as its main rivals.
Rising Sales, Steady Costs
In the filing, Spotify laid out a detailed financial data for the first time, showing rising revenue and relatively steady operating costs, which analysts took as a positive.
Spotify is the leader in streaming music services worldwide, with the company reporting 71 million paying subscribers and more than 159 million monthly active listeners (MAUs) as of December 2017. Its rival, Apple Music, is far behind at 36 million subscribers.
Revenue rose 39 percent to 4.09 billion euros ($4.99 billion) in 2017, from 2.95 billion euros a year earlier. Its operating loss extended up to 378 million euros in 2017 from 349 million euros.
Its net loss blew up 129 percent in 2017, caused mostly by financing costs related to a 2016 deal in which Sweden-based Spotify raised up to $1 billion in debt that would convert to shares upon an initial public offering. It had an operating loss of $461.3 million last year, and $425.9 million in 2016.
The company faces significant challenges in its business model, including volatility risks and unpredictable royalty rates it pays to music labels, publishers, and songwriters.
“We set out to re-imagine the music industry and to provide a better way for both artists and consumers to benefit from the digital transformation of the music industry,” the company said in its filing. “Spotify was founded on the belief that music is universal and that streaming is a more robust and seamless access model that benefits both artists and music fans.”
Spotify’s initial offering of shares will not be determined, though. It means there is no set price set by underwriters which will fill in opening trades on the New York Stock Exchange. Goldman Sachs, Morgan Stanley, and Allen & Company are advising Spotify on the offering.
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