On February 28th 2018, Spotify filed for direct listing on the New York Stock Exchange

Spotify is a music-streaming service that changed the music industry. The Swedish company was founded in April 2006, and on 7 October this year, the company has been on the market in ten years. It is developed by startup Spotify AB in Stockholm and now they want to sell shares to investors.

According to Spotify`s filing yesterday, the opening public price of its ordinary shares on the NYSE will be determined by buy and sell orders collected on the day of the listing. CEO Daniel Ek owns 9 percent of the company. Martin Lorentzon has 12 percent, but they will have full control over the company. Together they have 80 percent of the voting rights.

Spotify has so far been a bad business, but they changed the music industry with its new business model, and the industry`s revenue are growing for the first time since the CD was their «milk cow.» Spotify have 140 million users and 70 million are paying for their service.

Their revenue in 2015 was $2,18 billion. According to the filing, Spotify paid about 88 cents for every dollar in revenue in fees to record labels in 2015. It seems like it goes in the right direction for the company as those costs has declined to about 79 cents.

On top of that, Spotify has stopped burning cash and their free cash-flow margin is 2,7 percent. At the end of last year, the company had about 1,5 billion Euros in cash, cash equivalents and short-term investments.

Spotify as a company doesnt sell stocks in the non-IPO, but their stockholders will try to sell their shares to the public stockholders. According to Spotifys not-an-IPO filing, their value was as low as about $6 billion and as high as $23 billion in private stock transactions since the start of 2017.

You can ask yourself why they are doing it this way instead of raising money from a conventional IPO. Spotify`s existing shareholders can sell their shares to public stockholders, and it would be a win-win if record labels could buy a stake in the company. They will help each other.

Spotify operates under a freemium business model which means basic services are free, while additional features aer offered via paid subscriptions. Spotify makes its revenues by selling premium steaming subscriptions to users and advertising placements to third parties.

In 2013, the company launched a new website called «Spotify for Artists,» and they pay copyright holders royalties for streamed music. Spotify for Artists states that the company does not have a fixed per-play rate, instead considers factors such as the users home country and the individual artists royalty rate.

Rights holders received an average per-play payout between $.006 and $.0084. Spotify encourages people to pay for music, and their subscriptions are their main revenue source.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.


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