SAN FRANCISCO – Spotify's opening act on Wall Street has prompted investors to say that the forward-looking music streaming service of the unprofitable corporation will maintain its lead over Apple and other powerful challengers.
After several hours of anticipation on Tuesday morning, Spotify's shares traded up to $ 169 on their stock market debut, before declining slightly. The stock closed at $ 149.01, well above its previous high of $ 132.50 in stores built as a private company during Spotify's 12-year history.
The friendly listing of the stock market left Spotify with a market value of approximately $ 27 billion from FactSet. In comparison, the market value of the Internet radio station Pandora Media is nearly $ 1
Performance has Spotify's market value among the ten highest ever by a technology company after its first trading day after Dealogic. Chinese e-commerce company Alibaba Group holds top spot for $ 234 billion in 2014 following its market debut.
Spotify CEO Daniel Ek, who founded the company, became the biggest winner of the day. Its 27 percent stake in the Swedish company is now worth $ 7.4 billion.
The good mood around Spotify stems from his early leadership in music streaming – a still-evolving field that makes people think it's better to subscribe to millions of titles online than single albums and singles online to buy.
Spotify has reached 71 million subscribers worldwide and plans to increase that number to 96 million subscribers by the end of the year. It has 159 million users in total, including people who are willing to hear ads promoting free music access.
By comparison, Apple's nearly three-year-old music streaming service has 38 million subscribers. A list of other impressive competitors, including Google and Amazon, offer similar music streaming services, resulting in Spotify being wiped out by more rival competitors. The rivals of Apple, Amazon and Google together have amassed $ 402 billion in cash, compared to Spotify's $ 1.5 billion.
Spotify's success in music streaming has drawn comparisons with Netflix, which has built on its pioneering role in DVD-by-mail rental and then video streaming to a highly successful, subscription-driven franchise that has produced spectacular investment returns and has Companies with a market value of $ 122 billion.
A $ 10,000 investment in Netflix's 2002 IPO offering would now be worth more than $ 2.6 million, and some investors are wondering if Spotify could undergo a similar evolution in music streaming.
"Similarities are much larger than differences in our opinion," wrote Mark Mahaney, an analyst at RBC Capital Markets, in a recent research note examining the parallels between Spotify and Netflix.
In addition to blending technology with a subscription model to transform a populist As a form of entertainment, Spotify and Netflix have a common leadership in their lineage. Spotify's current chief financial officer, Barry McCarthy, had the same job when Netflix went public and remained in that position until leaving the video service in 2010.
Unlike Netflix, Spotify is still unprofitable after a loss of more than $ 2.4 billion ($ 3 billion) since it began more than a decade ago. After losing 1.2 billion euros, Spotify has also made it clear that it wants to focus on getting more subscribers instead of earning money for now.
Netflix has also distinguished itself from rivals in video streaming by spending billions on original programs like "Stranger Things" and "The Crown." Analysts are worried that it will be more difficult for Spotify, as it deals mainly with the same streaming rights as Apple, Google and Amazon – companies that can afford to even pay more if they want.
"One of the big questions about Spotify is whether they can reach the next level, like Netflix," said Daniel Morgan, senior portfolio manager for Synovus Trust.
Spotify Technology SA made its Wall Street debut in an unconventional way. A "direct listing" was conducted on the New York Stock Exchange, allowing the company's early investors and employees to sell as many shares as they like. This is a departure from a traditional IPO in which a company and a select few investors first sell a limited amount of shares at a starting price determined by investment bankers that measures investor needs for weeks at a time.
Direct listing could lead to wild results In the first few days of trading, Spotify's listing fluctuates, as Spotify's shares in privately negotiated transactions range from $ 48.93 to $ 132.50 in the first 11 weeks of this year were sold.
"Typically, companies are not following a direct listing, and while I know that makes sense for most, Spotify has never been a normal type of business," Ek wrote in a blog post.
"Our focus is not on the first splash," he added. "Instead, we will try to build, plan and imagine for the long term."