Spotify’s unusual IPO model will test the company’s strength.


Spotify officials plan to offer the company’s initial public offering only to institutional investors.
Pop music streaming service company will publicize the company official in the spring, and to plan a variety of unusual IPO is the abbreviation of “initial public offering (IPO), the investors are talking about the topic.
With Spotify’s IPO, the narrative so far is that another tech company is innovating and “disrupting” investment banking. But the image began to erode.
Typically, a listed company hires a large investment bank to issue new shares, then sell it and sell it. But Spotify plans to simply list on the New York stock exchange and let them trade. This is not often done.
Stanford graduate school of business, a finance professor at George parker said: “it is as if said ‘I have the coolest house on the block, everyone will want to buy it, so why give agent cuts’.
“For me, it’s very similar to a person who signs in the street and says, ‘this property is sold by the owner,'” Parker said. “Spotify is very confident that the public is aware of the value of Spotify and that it doesn’t need someone else to tell the story.”
Some analysts estimate it could save the company up to $300 million. Spotify’s current private investors can cash out without waiting for the traditional lock to end regularly. From this point of view, direct listing is just a more effective way of listing.
“We don’t think of it as another way of going public, it’s a bad way, it’s a defensive way of going into the open market,” said Catherine Smith, founder of Renaissance Capital.
Mr Smith said that Spotify had received unusual loans from private investment firms, including Goldman sachs, in 2016. Investors demand a lot of loans, “which suggests that investors think the company’s private valuation is too high,” she explained.
Spotify has 140 million users, but most users don’t pay. They listened to the flow of advertising support. Advertising revenues are only $300m a year – a fraction of the true cost of services.
Streaming services recently announced plans to move more aggressively to podcasts and multimedia news, a space where advertising revenue could be more favorable. Global podcast advertising revenue is about $250 million a year, says jack Shapiro, chief executive of RadioPublic, a free podcast platform.
“Through various measures, it is growing by leaps and bounds, and we expect to double and double in the next few months and a few years,” Shapiro said.
So if Spotify’s plan succeeds, it will help to capitalise on that growth. But now Spotify is still an unprofitable company that has been pushed into an IPO by private equity firms eager to get an IPO. Smith thinks mum and popular investors won’t buy it.
“Investors are more cautious about companies that don’t make money,” she said.
Spotify’s IPO is scheduled for late march or early April. There are a lot of details that need to be resolved before then.