Music streaming giant Spotify commenced its first day of trading on the New York Stock Exchange (NYSE) yesterday after the company filed for an initial public offering (IPO) earlier in March.
The Swedish company chose a unique and rarely used way to list its stock, eschewing traditional means of selling shares to investors at a set price via a bank, and instead going down the path of a direct listing where shares are offered to investors directly, with no set price, underwriters, or a lock-up on existing investors.
“Consequently, the trading volume and price of our ordinary shares may be more volatile than if our ordinary shares were initially listed in connection with an underwritten initial public offering,” the company said in its initial filing.
Due to the lack of a set price, the NYSE set a reference price of $US132 ($171) per share the night before trading commmenced reports CNBC, but on market open on Tuesday, Spotify shares were trading at $US165.90 ($215), before falling to close at $US149.01 ($193.90). The stock exchange also made a minor screw-up on the day, flying the Swiss flag instead of a Swedish one, which the NYSE noted in a tweet saying “we hope everyone enjoyed our momentary ode to our neutral role in the process of price discovery this morning”.
The listing values the company at around $US26.6 billion ($34 billion). The stakes in the company held by Spotify’s founders have also come to a significant valuation, with co-founder Martin Lorentzon’s 12.2% stake now worth approximately $US3.30 billion ($4.2 billion) and chief executive officer Daniel Ek’s 8.8% worth approximately $US2.37 billion ($3 billion).
Some have heralded Spotify’s unique listing path as a bellwether moment for tech IPOs in the US, with Recode journalist Theodore Schleifer saying a successful listing from Spotify through this method may switch the “push-and-pull power struggle between Silicon Valley and Wall Street” as one favoured towards Silicon Valley.
“More and more highly valued startups could think that they, too, do not need Wall Street’s usual fare in order to become a public company, and investment bankers could have a tougher time pitching their services to CEOs,” Schleifer writes.
In a blog post, Daniel Ek said while he is proud of what he and his team had built over the past decade, and is proud of the listing, he’s also aware that the day of listing should not become “the most important day for Spotify”.
“Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years. So while tomorrow puts us on a bigger stage, it doesn’t change who we are, what we are about, or how we operate,” he wrote.
“Normally, companies ring bells. Normally, companies spend their day doing interviews on the trading floor touting why their stock is a good investment. Normally, companies don’t pursue a direct listing. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company.
“As I mentioned during our Investor Day, our focus isn’t on the initial splash. Instead, we will be working on trying to build, plan, and imagine for the long term.”