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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

#41

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?

> Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management?

IPOs have (a) companies issuing stock, (b) private investors selling stock and (c) public investors pricing an asset never before continuously priced. All this happens simultaneously. If the ball drops on one, it drops on them all. Underwriting is a good way to manage that risk.

Private markets challenge that simultaneity. Instead of selling into the IPO, companies can sell some in the private markets and some after going public. Instead of having every insider sell on opening day, they can sell in private secondaries and then after the lock-up. That leaves element (c) isolated. That's difficult--Spotify still hired bankers--but it doesn't need underwriting.

Another way to look at it: three services were bundled into the traditional IPO. Bankers charged richly for the bundle. Private markets give companies the option, to dis-assemble the bundle and price and time them separately.

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

#42
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.

Also if I remember correctly, an increasing share of the losses are financing costs.

They're not operating as a sustainable business at this point. They will most likely need the VCs to continue throwing money at them.

Who knows, maybe it'll work. I personally wouldn't bet on it though.

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

#43
post #28

Earlier quoted context omitted.

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…

> 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. 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 abo…

> Spotify was under contractual requirements to go public, due to the terms of their last fundraising round

Spotify was under obligation to do an IPO. Part of the motivation for this structure was avoiding that penalty language.

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

#46

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…

It is alot easier (cost and effort) to start a band and put on album on Spotify, compared to creating a movie/tv show.

Consumption is different, as well - several minutes at a time versus dedicated visual attention for a minimum of 22 minutes.

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

#47
I'm not quite clear on why people are choosing spotify over google play music - to me the google option is superior in UI and offerings (including ad-free youtube).

Am I missing something? Is it just one runs better on iPhones or is more hip (like why people choose snapchat over instagram or something)?

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

#48

This has investment bankers quaking in their boots.

Not even remotely - they made out better on this than other recent IPOs.

They are paying 35 - 40 euros or ~$45 million at the midpoint. If they float $1 billion in shares today, that means fees are 4.5% of the overall “offering”, or almost exactly what Dropbox paid.

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

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

#49
post #5

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?

Are blue apron and stitch fix tech companies? I thought they were just sending out boxes of stuff to subscribers, with a website/app for taking orders?

Is Spotify a tech company? I thought they were just sending an audio stream to subscribers with a website/app for searching?

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

#50
post #4

So i bought in, who knows where this will go though :) One of my hopes it that just like NFLX, once the company focuses on producing / licensing it's own content they can do really well. I'm interested in hearing what others have to say on this! Did you buy, will you buy? Why?

I don't know much about buying shares but I would like to buy in and invest. Care to give me feedback on that? Where did you buy in?
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