Spotify opens at $165.90, valuing company at nearly $30 billion

Spotify opens at $165.90, valuing company at nearly $30 billion

Currently, the music streaming service boasts 71 million paying subscribers, an impressive figure given that Spotify only had 20 million paid subscribers in June of 2015.

The Associated Press reports that Spotify competitor Pandora is valued at $1.2 billion, and that the streaming service has been compared to having the growth potential of Netflix which is worth about $122 billion.

The direct listing could result in wild swings in Spotify's stock pricing during the first few days of trading, especially since Spotify's shares have sold in a range of $48.93 to $132.50 in privately negotiated transactions during the first 11 weeks of this year. The Swedish company's use of a "direct listing" allows its early investors and employees to sell as many shares as they want whenever they want.

While anticipating that Spotify share prices could start off strong, he saw risks for the company - which has yet to extract itself from the red. Launched in 2008, the company claims to have almost 160 million monthly active users, across dozens of countries.

Spotify said it's focused on a long-term plan to continue growth.

Trading on the New York Stock Exchange under the ticker SPOT, shares promptly jumped well above the NYSE's reference price for $132, and above the Guggenheim price target of $175 per share.

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Spotify's unusual approach required the 200-year old NYSE to change its rules and secure approval from the Securities and Exchange Commission.

"This direct listing will cost them only 10 to 15 per cent of that amount - that's a major cost saving", he said.

Spotify going public comes at an interesting time.

"This won't be replicated often", Matt Kennedy, an analyst with Renaissance Capital, told CNN.

Spotify's unusual route to publicly trading its shares will likely be watched by other technology companies that could be tempted to list without selling new shares, and by bankers that could lose out on millions of dollars in future underwriting fees. Spotify wanted to democratize the process and they didn't need to raise fresh money through the offering as is often the case with an IPO. Instead, current shareholders were able to sell their existing shares, and were not restricted on when they could do so. "Normally, companies don't pursue a direct listing", Ek wrote in a public post. The stock market has also been volatile recently with the Dow Jones industrial average falling more than 450 points, or almost 2 percent, Monday. That means that if the stock plunges, there is no big bank to prop up the share price with more share purchases. That could make it even more hard for investors to settle on the right price for Spotify's stock, they say.

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