Sony Music Entertainment has sold 17.2% of its shares in Spotify. This move at the IPO launch, brought in a gain of $260.5 mn (£185.1m) for the label. Sony’s original 5.7% stake would have been worth around $1.5 bn (£1.06 bn) after the first day’s trading. That made up around 0.98% of Spotify in total.
Sony estimated that the total net gain in value of its Spotify holdings (including the shares it sold on Tuesday) to be recorded for the quarter ending 27 April, 2018, would be about $1 bn (approximately 105 bn yen).
Sony Corp said in its statement said, “Due to this public listing and the sale, Sony expects to record an unrealized valuation gain (net)* for the shares SME continues to hold and a realized gain for the shares sold (net)*, both in other income, in accordance with U.S. GAAP.
On 3 April, Spotify (NYSE: SPOT) has opened for trading on the NYSE at $165.90, with 177 mn shares outstanding, that equates to a valuation just short of $30bn ($29.4bn to be closer to exact).
Spotify Technology shares sold via direct listing rather than a traditional IPO, finally opened well after midday at $165.90 a piece in New York, with 5.6 mn shares changing hands at that initial price, according to data compiled by Bloomberg. It eventually fell more than 10 percent from the opening price to close at $149.01 still higher than expected. The $149.01 closing price remained well above Monday night’s reference price of $132, even though it was under the day’s high of $169 a piece. The company warned that the price might be unstable.
On day two, Spotify’s current price on the New York Stock Exchange is bobbing at around $140.3 on the NYSE, suggesting a current valuation in the region of $25bn.
Daniel Ek explained his position in a company blog post. “Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years,” he wrote. “So, while tomorrow puts us on a bigger stage, it doesn’t change who we are, what we are about, or how we operate.” Spotify is the biggest company to ever go public via direct listing, and the first on the NYSE.
Ultimately, how successful Spotify’s public offering is will depend on whether investors believe there is a light at the end of the tunnel when it comes to profitability and how sustainable its business model is, not just for its own bottom dollar, but for the artists that are its lifeblood.
Sweden-based Spotify is available in 61 countries with an overall user base that includes ad-supported free listeners of 159 mn, and 70 mn paying users as of January 2018. The company was founded in 2006 by Martin Lorentzon and Daniel Ek, who remains its current CEO.
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