As Spotify begins trading, a mixed bag for recent tech IPOs

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              Mar 31 2018

Apple tried to kill Spotify. His 27 percent stake in the Swedish company is now worth $7.4 billion.

Spotify opened at $165.90 a share on the New York Stock Exchange Tuesday. Essentially, a direct IPO is likely to increase volatility on the first trading day.

The company's listing comes at a hard time for the tech industry, with shares of major companies like Facebook and Amazon tumbling in recent days. Spotify and Swift reconcile in 2017 after Spotify strikes new licensing deals with record labels. Since Spotify didn't do an IPO, it set a "reference price" of $132 per share, which would have given the company a valuation of $23.5 billion. The price discovery process was unusually long. They don't even know what to call the event.

"This won't be replicated often", Matt Kennedy, an analyst with Renaissance Capital, told CNN.

The Swedish company began trading at an opening price of $165.90 per share, almost 26 per cent above the reference price, before slipping back a little.

The Spotify stock symbol is SPOT, and trading on it is expected to begin on the New York Stock Exchange sometime this afternoon. Usually, the banker's role is to recruit investors and push the stock to a successful debut, including buying shares to stabilize the first few days of trading and without that security, the stocks could be more volatile. Instead, it is selling shares now help by its private investors and although this may save them some money, it ultimately makes the entire process volatile.

Some investors are concerned that Spotify will run the course of competitor Pandora, which has struggled as a public company, partly due to hefty artist fees. A huge number of shares hitting the market all at once could sink the stock price.

"This won't be replicated often", Kennedy says.

Silicon Valley is certainly watching.

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"Normally, companies ring bells". The company is using a so-called direct-listing process. The Wall Street Journal recently reported that the iPhone maker could overtake Spotify in the U.S.as soon as this summer.

Spotify, which was founded a decade ago, is the world's largest music streaming service and has more than 71 million subscribers.

Google and Amazon are also attempting to muscle in on Spotify's business. So far, none of have lived up to that title - though the competition remains fierce.

The growth - in line with global trends - was nearly entirely attributable to the rise in streaming subscriptions, according to the Recording Industry Association of America.

That success hasn't come cheap.

The strong early trading for Spotify came on the heels of a steep USA equity selloff led by tech stocks, although the market had found firmer footing at midday.

Bleeding money may not be enough to turn off investors, however.

Spotify going public comes at an interesting time. "Most companies do fall after their IPO, but the difference is that there is no underwriter to stabilize the price", he said.

Case in point: Dropbox, another mature but unprofitable billion-dollar tech company facing a similarly daunting list of rivals, is up more than 40% from its IPO last month.

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