Spotify Hits The Market In Unusual Debut

Spotify Technology S.A. (NYSE: SPOT) traded for the first time on a U.S. public stock exchange Tuesday.

The Debut

Traders and investors anxiously awaited Spotify’s debut. There were more than a dozen indications throughout the morning, with the stock finally opening around 12:44 p.m. ET at $165.90 per share, which was well ahead of the IPO reference price of $132. The Wall Street Journal noted this open took longer than “any other company in recent memory,” topping Alibaba’s (NYSE: BABA) late-morning 2014 debut.

Spotify closed its first day of trading at $149.01, near the low of the day but still 12.8 percent higher than the IPO reference price.

Pandora Media Inc (NYSE: P), perhaps its closest peer, closed down 3.2 percent at $4.64.

Calling Dr. Love

Ahead of the debut, KISS frontman Gene Simmons told CNBC Spotify is a “terrific company” with a “solid” management team. At the same time, the legislation governing Spotify and other streaming music businesses are “archaic and prehistoric.”

New music artists are getting “slaughtered” since the streaming music industry pays them pennies on the dollar. In fact, the estates of Tom Petty as well as Neil Young actually sued Spotify because, in their opinion, they weren’t being paid what they should.

“At the end of the day, the artists have gotten the rug pulled out from under them and I’m shocked that legislators in Washington haven’t taken the entire industry to task,” Simmons said.

What’s Next

Looking beyond Spotify’s first few hours of trading, MarketWatch presented five facts investors need to keep in mind for the long term.

• Revenue rose by 39 percent in 2017 to 4.09 billion euros ($4.99 billion), but losses more than doubled to 1.24 billion euros.
• Spotify’s unique IPO process eliminates share lockup periods and dilution, which are two areas that “hold startups’ shares before an IPO.”
• Spotify’s core business is streaming music as opposed to Apple Inc. (NASDAQ: AAPL), whose streaming music business is a small fraction of its overall size.
• Spotify boasts one key feature in the streaming music business few others hold: loyal customers.
• Family plans does lower average revenue per user, but has resulted in improving churn rates.

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