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Spotify launches its unusual IPO



Spotify Technology SA, a music streaming company, cemented the plans for its unusual stock market listing while revealing the financial details of a fast-growing company that turned the music industry upside down and revolutionized consumer behavior – but used up a lot of money.

Stockholm-based Spotify filed an IPO on Wednesday by filing with the Securities and Exchange Commission a so-called F-1, which contains years of financial data and details on how the 10-year-old company will launch its IPO [19659003] The filing showed that the company's revenues are growing strongly, but losses are rising. The company achieved sales of 4.1 billion euros ($ 5.01 billion) in 2017, nearly 39 percent more than in the previous year. The company, which has not yet posted any profit, recorded a loss of € 1

.24 billion in 2017 compared to € 539 million in the previous year and € 230 million in 2015.

Revenue growth has slowed recently; it was 52% in 2016.

Spotify's debut will be one of the biggest tech deals of recent years. Based on private transactions in February, the value of Spotify reached $ 22.6 billion

A standard IPO schedule shows that Spotify's shares traded publicly on the New York Stock Exchange during the week of March 26 Potential Investors

Unlike traditional IPOs, Spotify does not offer any new shares on its initial public offering. Instead, through a process known as direct listing, Spotify will simply float its existing shares and set the market without banks acting as underwriters to set prices, distribute shares to investors, and run the backstop trade, as in the case of one regular listing is common. There is little precedent for the type of direct listing that Spotify seeks.

Spotify's listing is likely to be sought after by investors seeking high growth, often associated with high-profile technology IPOs that have been rare lately. Most start-ups with the highest ratings – including Uber Technologies Inc. and Airbnb Inc. – have postponed the IPO, as they still have access to abundant capital from large investors.

Launched in Sweden in 2008, Spotify brought its service to the US, disrupting and restoring the music industry. In a pirated and file-sharing marketplace, Spotify has released a huge collection of songs that are available to users for $ 9.99 a month in return for listening to commercials or on-demand. The service offers 35 million songs, according to the submission, and said that it has 159 million active users per month. As of December 31, there were 71 million paying subscribers.

According to the Recording Industry Association of America, paid subscriptions were the largest source of revenue for record companies in the US in the first half of 2017, at 61%.

Yet, music streaming has not yet proven to be a viable business as companies, who operate such services have difficulties in achieving their profitability. As services grow, active users and paid subscribers are the best-watched metrics. Spotify believes it can be profitable once it has accumulated enough users without specifying what the level will be.

According to the company, 44% of subscribers subscribe in 2017 compared to 31% in 2015 Subscribers generate much more revenue than users who hear about the company's ad-supported option.

But Spotify also said that paying subscribers on average generated a shrinking amount of revenue. A "premium" user was worth an average of 5.24 euros per month in 2017, compared to 7.06 euros in 2015. The company attributed this decrease to the introduction of discounts for students and families for the extraction and retention Of Subscribers Are Important

Some music company managers have been upset over Spotify's challenges in turning users of their free tier into paying subscribers, people who are familiar with their thinking have said.

apple
Inc.

Music streaming service, which offers only a subscription model, has added subscribers in the US faster than Spotify.

Spotify remains the global leader, with nearly twice as many paid subscribers as No. 2 Apple Music. Tech giants

Amazon.de
Inc.

and

alphabet
Inc.

YouTube also operates paid music streaming services, as well as Internet radio companies

Pandora media
Inc.

By structuring its IPO as a direct public offering, Spotify will save millions in bank fees and pay around $ 35 million to those familiar with the structure rather than $ 100 million

snap
Inc.

he has paid for his initial public offering with an expected initial valuation similar to that at which Spotify is expected to debate on the stock exchange.

Instead of setting a price and placing stock with selected investors before trading begins, Spotify's consultants work

Goldman Sachs Group
Inc.,

Morgan Stanley

and Allen & Co. will play a lesser role in helping buyers and sellers at a price by measuring interest rates at different prices. They will not participate in investor meetings before the start of trading, it said in the application.

Spotify has specified in his submission how the price will be set when his shares are opened for trading. While Spotify's advisers will not create a book of investors or select a price, the company said Morgan Stanley will consult with so-called designated market maker firms to determine the opening price of Spotify's stock on the New York Stock Exchange determined by Buy -and-Sell Orders from Investors

Despite a pushback against dual-class index fund shares and the SEC in recent months, Spotify will have a dual-class structure to its founders

Daniel Ek

and

Martin Lorentzon,

80.4% of the election control. Mr. Ek, the company's CEO, recently held around 25.7% of the shares, while Mr. Lorentzon held around 13.2%.

Write to Maureen Farrell at [email protected] and Anne Steele to [email protected]


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