The media streaming giant is set to list on Tuesday 3rd of April on the New York Stock Exchange: Indeed this new listing is one of the more unusual listings I have seen in a while.  How so?  Usually a technology company looking to go public would first have an IPO – an initial public offering, where they offer shares to early investors via a book build – this then involves a large investment bank, which first places the shares to potential investors then agrees to act as an underwriter to the listing.  Interestingly, this is not happening with Spotify.  Instead we have direct listing, directly onto the exchange – importantly no new shares will be listed, meaning Spotify isn’t looking to raise capital in this listing and the outcome means current shareholders will not be diluted. Whilst this is positive, this concerns me slightly. Having no underwriter in the form of an investment bank can mean the shares are more volatile: historically, even IPO success stories like Facebook can produce initial negative share performance as investors weigh up the company business plan and other fundamentals. Having an underwriter usually means this transition of trading to a listed company has increased stability.

Spotify is a new world success story, having only began business in 2008, the media streaming giant has now grown to 140 million active users per month, with more than 70 million subscribers paying for services.  This means revenues have jumped from €2.95 billion in 2016 to €4.09 billion in 2017.  Amazing, I predict this will mean the valuation just after listing will be in the region of $27 billion. The next step for Spotify will be key: the exchange listing will give the brand greater visibility and credibility. For it to compete with Apple Music and Google Play it will need that. Generally the fundamentals for the company seem extremely enticing.  However, for me there are a couple of areas of contention: Firstly the activation of the ‘order’ generation of music lovers: moving this group of potential users from the fee or owing based model to the streaming based system with monthly subscription will be likely difficult.  Secondly, the current climate for listed technology companies is one of trepidation.  Admittedly this is due to specific reasons at specific companies: For example, potential tax bill implications at Amazon and alleged data collection methods at Facebook. Nevertheless, this does affect overall investors’ appetite for new tech listings, like Spotify and I will watch with interest how they open on Tuesday.

Chief Trader,

Jordan Hiscott

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