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> The company says that in 2018, shares traded on the private markets between $90 and $132.50. > Losses for last year were 1.2 billion Euros ($1.47 billion), which compares to 539 million Euros ($661 million) the year before. Well, there's the short of the year.
>Well, there's the short of the year. I think you're missing SNAP.
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…
Earlier quoted context omitted.
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 valua…
That's typically not true. The underwriter isn't guaranteed the difference. They're basically an insurer: the company is able to know (before the IPO) exactly how much money they can expect to make on it. In exchange for this certainty, the forego the potential upside (the chance that the opening price will be much higher, in which case the company is leaving money on the table).
In this case, Spotify isn't even raising any money (because this is a direct listing, not an IPO), so there's no point for underwriters, because... well, there's no uncertainty about how much money they'll be raising, since they're not raising any.
Maybe my perception is off, but it seems like we're getting lots of tech IPO's in a relatively short time. Stitch Fix, Dropbox, Blue Apron, Snap, and Roku to name a few. For a long time we weren't seeing too many big tech IPO's. Did something fundamentally change in the market to lead to this, or did all these companies just happen to make it to "market maturity" around the same time?
Earlier quoted context omitted.
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 e…
Yup, Spotify was under contractual requirements to go public, due to the terms of their last fundraising round (or else they had to pay incredibly stiff penalties).
Underwriters serve a role for most IPOs, but Spotify is different because their listing wasn't about raising money - it was about fulfilling their contractual requirements to provide liquidity on public markets so that they could avoid the penalties they would otherwise face.
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 p…
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.
I wouldn't be surprised, though, if less-popular tracks for artists moved to another service. You want to hear The Chainsmoker's radio singles? Play them non-stop on Spotify! But if you're a huge fan and want to hear back tracks, demos, etc, you can pay them $10/mo on a Patreon-like site. Basically, charging more for a closer relationship to studios you like, while their more popular music is released for free.
Earlier quoted context omitted.
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 valua…
> 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. That's typically not true. The underwriter isn't guaranteed the difference. They're basically an insurer: the company is able to know (before the IPO) exactly how much money they can expect to make on it. In exchange for this cert…
Maybe my perception is off, but it seems like we're getting lots of tech IPO's in a relatively short time. Stitch Fix, Dropbox, Blue Apron, Snap, and Roku to name a few. For a long time we weren't seeing too many big tech IPO's. Did something fundamentally change in the market to lead to this, or did all these companies just happen to make it to "market maturity" around the same time?
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.