Music streaming service Spotify began trading on the New York Stock Exchange (NYSE) today at $165.90 (£117), a 34 per cent increase on the initial set reference price. The opening price puts the company's value at nearly $30bn, making it one of the largest US listings for a tech company in history.
The public listing came after more than three hours of discussion among traders who struggled to set a price of the company: according to reports, it's the latest open for a NYSE-listed stock ever, beating out retail giant Alibaba which began trading just before noon in 2014.
The difficulty in setting the price is likely related to the unusual nature of Spotify's offering. Rather than pursuing a traditional initial public offering or IPO, Spotify offered a direct listing, meaning it wouldn't be issuing any new stock. Instead, the streaming service only sold shares already held by its investors, making the stock more volatile.
“Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years,” wrote Spotify CEO Daniel Ek in a blog post yesterday. “It doesn't change who we are, what we are about, or how we operate.”
The company’s listing comes at a difficult time for the tech industry, with shares of major companies like Facebook and Amazon tumbling in recent days. Meanwhile, a looming trade war with China has seen shares across Wall Street plummet.
The tech sector recovered to some extent today, with the tech-heavy Nasdaq opening around 0.6 per cent higher, thanks in part to electric car manufacturer Tesla, whose stocks rallied. Shares for Facebook, Netflix and Google's parent company Alphabet also rose slightly today, following weeks of uncertainty.
However, Amazon stocks dipped after US President Donald Trump again lashed out at the tech giant, repeating his unsubstantiated claim that the online retailer is costing the country’s postal service money. Political turmoil surrounding companies from Amazon to Facebook is likely to continue, creating increased uneasiness for investors in the tech sector.
Ek appeared to acknowledge the difficulties facing the company in his blog post, writing: “I have no doubt that there will be ups and downs as we continue to innovate and establish new capabilities. Nothing ever happens in a straight line — the past ten years have certainly taught me that.”
Neil Wilson, senior market analyst at ETX Capital, warned that the company’s public listing “probably comes at about the worst possible moment for sellers of stock”. For comparison, Wilson pointed to shares of the video streaming service Netflix, which were down 5 per cent on Monday, 15 per cent lower than they were earlier in March.
“With sentiment around tech weak at present the direct listing might price towards the lower end of consensus,” said Wilson. “And with no underwriters and stabilisation agents the stock could be extremely volatile in early trade.”
Spotify, which first launched in Sweden 12 years ago, has 157m customers, 72m of which are paying subscribers to its premium service. Still, the streaming company, which has an estimated 40 per cent share of the global market, is yet to make a profit due largely to the high cost of royalties it pays to artists and record labels.