Spotify filed for an initial public offering on Wednesday and will trade on the New York Stock Exchange under the ticker SPOT.
As first reported in January, the music-streaming company is pursuing an unusual direct listing, which means that the company will begin selling shares without going through the customary IPO processes of underwriting or putting on a series of “roadshow” presentations to investors. Spotify in fact warns in its filings that the lack of underwriting could make its shares more volatile, since there won’t be financial institutions to prop up or evaluate the price. It will, however, be able to avoid the fees usually required for underwriting.
The filing gives us a peek into Spotify’s financial performance, as the company reports a revenue of $4.99 billion and a loss of $1.5 billion in 2017. It also set its IPO at $1 billion, though Axios notes that the eye-popping figure is a placeholder that will probably change in the future. Based on the performance of its shares on private markets, the company could have $23 billion valuation, according to an estimate from CNBC. Its last valuation in 2015 was $8.4 billion. Spotify is currently the most popular streaming service in the world, with 71 million subscribers as of December 2017. Meanwhile, its main competitor Apple Music has 36 million, but industry experts predict it could dethrone Spotify this summer based on current growth rates.
Spotify is still unprofitable, and will continue to struggle with margins unless it finds a way to get around the fact that streaming services have to pay music labels every time a song is played, as Recode points out.