How is Spotify raising capital from this if it's not selling shares directly? Will it wait until later to offer stock directly to the markets?
Spotify opens on NYSE, valuing company at almost $30B
61–70 of 479 posts
Re: Spotify opens on NYSE, valuing company at almost $30B
#62I 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…
Netflix was at the mercy of the content producers but it managed to work out of the hole by making its own content. Even if Netflix dropped the entire third party content repo, their current production content is enough to justify a subscription for many people. Spotify could easily follow Netflix's playbook by identifying musical trends that people enjoy and crafting new music.
Re: Spotify opens on NYSE, valuing company at almost $30B
#63I'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)?
It's the music discovery aspect of Spotify that is their game changer. They are constantly adding new ways to find new music.
Re: Spotify opens on NYSE, valuing company at almost $30B
#64> 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.
May I introduce you to the Efficient Market Hypothesis (https://en.wikipedia.org/wiki/Efficient-market_hypothesis).
Re: Spotify opens on NYSE, valuing company at almost $30B
#65Maybe 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?
Pivotal also filed their S-1, though I don’t recall any date estimates on that one.
Re: Spotify opens on NYSE, valuing company at almost $30B
#66I 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.
>To become music's Netflix they would have to produce their own music which people want to listen to
Didn't Starbucks try something like that? I think it was called Hear Music.
Re: Spotify opens on NYSE, valuing company at almost $30B
#67I 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.
I suspect that the average paid Spotify user is actually listening for hours at a time, while they are working or driving. I don't think people are turning it on and off a few songs at a time.
Re: Spotify opens on NYSE, valuing company at almost $30B
#68I 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.
Or purchase some existing labels. Warner, which is about 20% of the global market, was worth $3.3b -- 11% of spotify -- in 2011 [1]
If I read that correctly, it implies the bulk of the recording industry is worth less than Spotify.
1. https://www.reuters.com/article/us-warnermusic/blavatniks-ac...
Re: Spotify opens on NYSE, valuing company at almost $30B
#69Earlier quoted context omitted.
> 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.
> Spotify was under obligation to do an IPO. Part of the motivation for this structure was avoiding that penalty language.
To be specific: they did a DLP, not an IPO. Underwriters make sense for IPOs, because the company is raising money. There's no point to an underwriter in an DLP, because the company isn't raising money.
They were not under requirements to hold an IPO; they were required to provide public liquidity to their shareholders. That's why they chose a process that involved no underwriting. And that's also why their case doesn't really provide any generalize lessons, because those types of terms are incredibly rare in growth-stage venture financing.
Re: Spotify opens on NYSE, valuing company at almost $30B
#70Earlier 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…
> If your stock underperforms, you have to pay them back
You're referring to the greenshoe [1].
Suppose a company is selling 100 shares at $100 per share. The underwriter will collect orders for 115 shares at $100 per share. This puts them in a natural short position.
A greenshoe lets the underwriter buy up to 15 additional shares from the company at $100 per share. If the price goes up to $105, they exercise the greenshoe. They buy 15 shares from the company at $100 and deliver them to the buyers to whom they sold shares they didn't have. If the price goes down to $95, they buy those shares (leaving the greenshoe un-exercised) and deliver them to the buyers to whom they sold the shares at $100.