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Spotify opens on NYSE, valuing company at almost $30B

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Re: Spotify opens on NYSE, valuing company at almost $30B

#21

Post by jonknee »

jedberg wrote: post #11
jiggunjer wrote: post #3

How much are the investment bankers earning on this?

Edit: Apparently I was wrong, they still paid a bunch of bankers for advice, but technically they aren't making anything by skimming off the top like most IPOs. I think nothing. It's a direct sale, so the insiders (including the employees, not just the execs) get to sell however many shares they want directly to public shareholders. So the company doesn't make any money either, just the shareholders. I suppose at som…

They're actually making more from Spotify's direct listing than they did for Dropbox's full on IPO... So much for disrupting the business model!

https://www.bloomberg.com/news/articles/2018-03-26/spotify-l...

Re: Spotify opens on NYSE, valuing company at almost $30B

#23

Post by guelo »

I just don't see how this can be a successful company long term. If the labels see any profit they will demand more fees at the next deal negotiation. To become music's Netflix they would have to produce their own music which people want to listen to, which is a lot easier said then done. The easiest route is probably to become Tidal and give the company away to a few big artists in exchange for exclusives.

Re: Spotify opens on NYSE, valuing company at almost $30B

#24

Post by jedberg »

fullshark wrote: post #10
JumpCrisscross wrote: post #2

Contrasting this offering, where there were no underwriters and things proceeded spectacularly, with the Dropbox IPO, where the underwriters added negative value, speaks profoundly to the future role of private markets in the capital markets for technology companies. Disclaimer: I bet my career on private markets supplanting public ones, in respect of certain technology companies, many years ago.

I don't get this argument. Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management?

My understanding is that the underwriters are gatekeepers, not risk managers. If your stock underperforms, you have to pay them back, but if your stock over performs, they keep the extra.

In theory the service they provide is valuation, but in this day and age of instant information, that really isn't necessary anymore. Back in the day when it took a few days for a person to execute a trade, maybe they provided valuable insight, but now, with stock trades for retail investors taking seconds from "I want that" to "I have that", they don't really have better information anymore.

Re: Spotify opens on NYSE, valuing company at almost $30B

#25

Post by TAForObvReasons »

zer00eyz wrote: post #12
swypych wrote: post #7

Spotify Revenue (Euros) 2017 4.09 billion 2016 2.95 billion 2015 1.94 billion Net Loss (Euros) 2017 1.2 billion 2016 539 million Impressive revenue growth, but I can't understand the valuation given the losses. I love their product though.

The value, well it is "investor demand" The going public part -- well that was foretold with their last round of financing (it was a condition) and this was a strange way to do it. You may love the product but will it last is the question. If I were going to bet I would say that 5 years down the road someone buys it for pennies on the dollar or it goes bankrupt due to toxic debt. I wonder what the short position is o…

> this was a strange way to do it.

This was done partially because the company itself isn't raising money. If the company executives believed they would need a large cash cushion, they would have tried to raise some cash in the deal, so they must believe they can reverse course before the cash crunch

Re: Spotify opens on NYSE, valuing company at almost $30B

#26

Post by chimeracoder »

fullshark wrote: post #10
JumpCrisscross wrote: post #2

Contrasting this offering, where there were no underwriters and things proceeded spectacularly, with the Dropbox IPO, where the underwriters added negative value, speaks profoundly to the future role of private markets in the capital markets for technology companies. Disclaimer: I bet my career on private markets supplanting public ones, in respect of certain technology companies, many years ago.

I don't get this argument. Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management?

> I don't get this argument. Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management?

Yes, and furthermore, the Spotify listing is anomaly in a lot of ways due to the idiosyncratic terms under which they raised money previously, and the fact that the major labels (who are their primary vendors) had ownership stakes in them from the very beginning.

In IPOs, companies raise money, and underwriters serve as insurers to guarantee the amount that the company will raise. But Spotify isn't even raising any money today! They're just providing liquidity for existing shareholders. That's dramatically different from IPOs, so of course the underwriters are superfluous for this particular case.

I don't think it makes sense to generalize anything from Spotify, but certainly not the role of underwriters.

Re: Spotify opens on NYSE, valuing company at almost $30B

#27

Post by synaesthesisx »

I do love Spotify as a product, however I don't think it will scale the same way Netflix does. Spotify is at the mercy of major record labels, and as their books become more transparent the record labels will squeeze every dollar they can for licensing. That is, unless they find a way to upend the record industry entirely.

Spotify has a unique position with their amazing discovery/recommendations engine- they could potentially start their own "label" and promote their own artists that sign on. Small/independent musicians could see more exposure and Spotify can deliver more music tailored for individual tastes. I've personally found myself listening to lots of small/indie artists as a result of their algorithms, to the point that these now make up the majority of my listening experience.

I think getting into concert tickets/streams, merchandise etc could help them potentially capture quite a bit of value in the future as well.

I know the comparison is similar to original content & Netflix - but keep in mind there's an opportunity cost with media (one can only consume X amount of shows/songs within a period of time). The more attention Spotify can divert away from the major record labels the better.

Re: Spotify opens on NYSE, valuing company at almost $30B

#28

Post by eganist »

fullshark wrote: post #10
JumpCrisscross wrote: post #2

Contrasting this offering, where there were no underwriters and things proceeded spectacularly, with the Dropbox IPO, where the underwriters added negative value, speaks profoundly to the future role of private markets in the capital markets for technology companies. Disclaimer: I bet my career on private markets supplanting public ones, in respect of certain technology companies, many years ago.

I don't get this argument. Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management?

Well, that and aid with the capital raise. In this case, my understanding is there wasn't a capital raise so much as there was an opportunity for existing shareholders to liquidate their positions.

Edit: yep.

> The digital music company isn’t selling its shares on the stock market, meaning the company isn’t raising any money today. Instead, the event known as a “direct listing,” is a collection of transactions from existing shareholders (like employees and investors) selling shares directly to stock market investors. It took a while for the market makers to sort this out.

Re: Spotify opens on NYSE, valuing company at almost $30B

#29

Post by ikeaman »

zer00eyz wrote: post #12
swypych wrote: post #7

Spotify Revenue (Euros) 2017 4.09 billion 2016 2.95 billion 2015 1.94 billion Net Loss (Euros) 2017 1.2 billion 2016 539 million Impressive revenue growth, but I can't understand the valuation given the losses. I love their product though.

The value, well it is "investor demand" The going public part -- well that was foretold with their last round of financing (it was a condition) and this was a strange way to do it. You may love the product but will it last is the question. If I were going to bet I would say that 5 years down the road someone buys it for pennies on the dollar or it goes bankrupt due to toxic debt. I wonder what the short position is o…

I know they didn't go through a traditional IPO model, but from what I understand there's always a certain amount of days imposed by the SEC to restrict short selling on novel securities.

Re: Spotify opens on NYSE, valuing company at almost $30B

#30

Post by harshgupta »

guelo wrote: post #23

I just don't see how this can be a successful company long term. If the labels see any profit they will demand more fees at the next deal negotiation. To become music's Netflix they would have to produce their own music which people want to listen to, which is a lot easier said then done. The easiest route is probably to become Tidal and give the company away to a few big artists in exchange for exclusives.

Thats fair, but accessing free music is a lot easier than free tv. If they can get people to pay anything for music, thats at least better than zero for labels.
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