Spotify Valued at $29.5 Billion as Stock Begins Trading at $165.90 Per Share

[MacRumors]

Spotify, Apple Music's main competitor, this morning opened on the New York Stock Exchange at $165.90 per share, valuing the company at $29.5 billion.

When Spotify filed to go public in February, CNBC estimated the company's valuation at ~$23 billion based on private trades that had reached as high as $132.50. Spotify used the $132 per share figure as its reference price, which would have given the company a $23.5 billion valuation.

As noted by TechCrunch, Spotify is not selling its shares on the stock market and is not raising money today. Its direct listing is instead a collection of transactions from existing shareholders selling shares to stock market investors.

Spotify employees are allowed to sell their shares right away, unlike with a traditional IPO, which could lead to volatility in the coming weeks.

As of December 31, 2017, Spotify had 159 million active monthly users and 71 million premium subscribers, which Spotify says is "double the scale" of Apple Music. Apple as of February boasted 36 million paying subscribers.

In an appearance on CBS This Morning, Spotify cofounder and CEO Daniel Ek today discussed the company's public offering and a recent report from The Wall Street Journal suggesting Apple Music is on track to overtake Spotify in U.S. subscribers.

In response, Ek said that because Spotify is twice the size as Apple Music, the company "still has some room." Ek said that he's "very happy" with the growth that Spotify is seeing. The music industry, he says, is too big for Spotify alone.

"What we've found is that when we've got competition, it actually grows the market because more people are now talking about streaming. It's easy to forget that just three years ago, even in the U.S., streaming wasn't a thing," he said.

Update: Spotify closed at $149.60, giving it a market cap of $26.5 billion.

Article Link: Spotify Valued at $29.5 Billion as Stock Begins Trading at $165.90 Per Share

 

[iMi]

These tech valuations are ridiculous.

Edit to add that the valuation suggests a per active user value of $188. That’s everyone. Not just premium paying customers.

Seems steep.

 

[jacobh101]

for a company that has never turned a profit. wow

 

[WhoDaKat]

OMG! 30 BILLION! LOL do they even make any money? This is insane. At $170 a share, you can count me out. I'm sure it will be a fun ride for some, but in the end this valuation will do them in. Its one thing to not make much money as a startup, its another to try an keep investors happy when they paid $170 a share. How do they expand? Sure their user base is growing but everyone has heard of Spotify. Its not like there is some untapped market to hit. As an investor, I would be weary.

 

[tomnavratil]

What a joke. Congrats to Spotify’s management as this valuation is totally messed up considering they didn’t make any profit and lack any strategic direction.

 

[Krayzkat]

there’s definitely another tech bubble brewing.

 

[tobefirst ⚽️]

This seems to happen with a lot of (tech) companies. Their IPO (or direct listing in this case) gets bumped way up the first day or two, and then slowly (or not so slowly) drops and drops and drops.

 

[Chupa Chupa]

Tech has been wobbly of late and also suspicious of its IPOs esp after SNAP. I wouldn’t be so quick to dismiss, esp with no big WS underwriters getting to line their pockets to push it out the door.

 

[Kabeyun]

Was planning on learning how to short a stock. Now that I’ve read that Spotify management is comparing Spotify to the “scale” of Apple Music, without acknowledging that Apple Music is supported by a massive profit machine, I really want to learn how to short a stock.

 

[bibigon]

These tech valuations are ridiculous.

Edit to add that the valuation suggests a per active user value of $188. That’s everyone. Not just premium paying customers.

Seems steep.

They're growing their users by something like 50% a year, so that's not inherently a problem. If they can start actually monetizing users, then the valuation per user may well be fine. The issue is right now they lose money on every user, and have yet to articulate a way to change that.

 

[Scooz]

For what? For reselling Music that meanwhile any interested company could get a streaming license for?

Who buys such a thing? (except for Apple, of course. Ah, the fear...)

 

[maflynn]

Wow, that's a lot of moola. Hopefully they'll be able to turn a profit soon.

 

[ArtOfWarfare]

AAPL is $166.65. SPOT is $155.31. Could sell my AAPL and buy the same number of shares of SPOT, pocket the rest.

I think I'll wait to see where SPOT settles before I buy it.
[doublepost=1522779357][/doublepost]

These tech valuations are ridiculous.

Edit to add that the valuation suggests a per active user value of $188. That’s everyone. Not just premium paying customers.

Seems steep.

I've had an active family plan for 3 years now, so that's $560 in revenue they've gotten from me, just one of those active users. Seems undervalued when you put it that way.

 

[Christoffee]

 

[Cosmosent]

WOW !, & Congrats to the entire Spotify team !

 

[gnipgnop]

These IPOs are carefully orchestrated and the trading rules carefully written so that a small number of people in early make big bucks right away, followed by the inevitable tanking as "everyone else" gets access...

 

[iMi]

AAPL is $166.65. SPOT is $155.31. Could sell my AAPL and buy the same number of shares of SPOT, pocket the rest.

I think I'll wait to see where SPOT settles before I buy it.
[doublepost=1522779357][/doublepost]

I've had an active family plan for 3 years now, so that's $560 in revenue they've gotten from me, just one of those active users. Seems undervalued when you put it that way.

Key word - revenue. Do you think they have assets and profit projections to justify $188 per active user?

They have yet to turn a profit, so the answer has to be no. It’s a service company without large asset base, no inventory to monetize (again, as tangible asset) and frankly they operate in a highly compatitive landscape. To make matters worse, the competition, like Apple, have very deep pockets. Last, even an ad based revenue model seems like a limited venture. Amazon will give you ad free experience for $3.99 if you own an Alexa device? Apple had HomePod and an ecosystem that expands beyond music.

That’s why I think they are way overvalued. That’s just my opinion. I’m not an expert in finance.

 

[davidrpoliti]

They're growing their users by something like 50% a year, so that's not inherently a problem. If they can start actually monetizing users, then the valuation per user may well be fine. The issue is right now they lose money on every user, and have yet to articulate a way to change that.

They've got about 30MM paid users, paying about $12/mo. Lifetime value over 5 years is about $720/user, valuation seems correct.

 

[OldSchoolMacGuy]

They need the cash. If these current lawsuits go against them, they'll be paying out billions and it very likely could sink the company.

 

[69650]

Good luck to them. Without the success of Spotify, Apple Music would not exist.

 

[pika2000]

Tried paid Spotify, ending up cancelling it after a few months as I don’t really use it. It seems to only caters to mainstream music.

 

[itsmilo]

As a noob when it comes to anything related to the stock market, it always blows my mind how companies that don’t turn profit get valued just for showing signs of grows. What happens once there is nothing to grow anymore. Same with Netflix. Growth growth growth.

 

[Scooz]

They've got about 30MM paid users, paying about $12/mo. Lifetime value over 5 years is about $720/user, valuation seems correct.

If they had no costs (which they seem to have in the same amount) or could produce the music themselves from
now on....

Right now there‘s no reason for that price. If they had an real IPO and lots of incoming cash that they could stuff into the current trend of tv shows they might get somewhere, though. Like any specialized chain selling some additional goods to customers already visiting their stores.

Which might be the reason for not having a normal IPO that would have totally down-corrected that estimated value.

The price might be correct for the customers and future sales, not for the current business and not about that calculation. And it‘s a huge risk. Questionable if we need another video provider or whatever they want to sell to their visitiors. Like with Apple Music. Might make sense after the cosolidation. For a few of them.

 

[Apple_Robert]

That stock bubble is going to burst. There is no way I would pay that per share cost.

 

[budselectjr]

Good deal for all the record companies that are investors in the company. This obviously was the end game.