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Spotify’s shares tumble, loses $14.2 bn in market cap since July

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When all seemed hunky dory for music streaming giant Spotify, it’s consistently well-performing stock is now tumbling down.

Spotify’s shares (SPOT) crashed to an all-time low, on Tuesday, trading briefly at $119.89. At the 4 pm ET Wall Street bell, SPOT was resting at $120.51, barely above the $120-mark. Analysts, however, continue to say ‘Buy’.

The continued crash meant that SPOT has lost approximately $14.2 billion in market valuation since late-July. At that stage, bulls were calling for a serious surge above $200, especially as shares approached $199. But Spotify’s all-time high remains $198.99, while a sub-$100 future is now entirely plausible.

While Spotify faces a hit, Chinese streaming music service Tencent Music is also struggling. In Tuesday trading, TME shares fell below $12, with a sub-$10 future likely. That’s already below TME’s recent IPO offering price of $13.

Broader U.S. equity indexes hit their lowest levels in 14 months on Tuesday due to the rising interest rates, a lingering trade war, and a looming government shutdown. These concerns are pushing investors to concentrate more on the fundamentals such as profitability or even a remote chance of long-term profitability.

By looks of how SPOT is performing, it is definitely lacking the former and there isn’t much to assure if they can even achieve the latter.

What complicates the matters further for Spotify is its holdings in Tencent Music.  As part of an equity swap between the two streaming companies, Spotify got 8.5 million shares of the future TME, with a fair market value assessed at $6.52. This only means that Spotify’s TME holdings are still in the black, but just barely. As TME faces the threat to dip further into the single-digits, it wouldn’t be wrong to say that the value of Spotify’s holdings could easily slip into a negative zone.

 

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