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Live Analysis

Spotify direct listing on NYSE estimated at USD 20 billion

The world leading music service provider long-awaited going public event is finally approaching. Starting in April 3rd 2018, Spotify is expected to sell up to roughly 55.7 million shares on the New York Stock Exchange, out of which CEO Daniel Ek 15.8 million shares valuation is approximated at up to USD 2 billion according to most recent estimates. The Swedish unicorn founded in 2008 is planning to implement an unconventional listing approach called a “direct public offering” (DPO) and which does not require the support of any institutional counterpart in the context of an initial public offering (IPO), as market laws will enact on market pricing directly. This issuing method presents close to no hurdles apart the need of performance, without which the initial share price (estimated to lie within the range of USD 90-132.50) would be drastically falling right at the start. Other drawbacks concern potential price mismatch relative to market value of the newly issued stocks and early days’ price volatility, which would strongly fluctuate in the short-term – a bit like cryptos. On the other side, fees paid to investment banks and share dilution effects are nonexistent, allowing employees and executives to maintain (or reduce) their holdings at ease.

According to recent rumors, Spotify co-founders Daniel Ek and Martin Lorentzon will continue to detain the majority stake in the company (estimated above 80%) after the stock listing next Tuesday, no matter what happens with the floating in the market. In a similar manner as for Alphabet (Google) and Facebook, Spotify co-founders will supposedly holding shares with super-voting rights, using a dual-class structure, often criticized by investors for the lack of consideration of its existing shareholders and which lies at center stage of lawsuits (e.g. Saint-Gobain takeover on Sika, Redstone Sumner concerning Viacom, etc.).

Expected to see revenue grow by 20% to 30% or USD 6 billion in 2018 (2017: 39%) and with the benefits of a favorable currency effect (EUR/USD: +2.52% year to date), Spotify confirmed having reinforced its partnerships with major music labels, reducing the risk of shaky earnings for the periods to come. As 2018 sales are taking off due to an increasing amount of “premium” subscribers (+45% in 4Q 2017), Spotify estimates its current client mass of 71 million users (Apple Music: 36 million) to reach the 90 million target by the end of the year.

Accordingly, following the same trend line as Spotify in the product range of interactive technologies, we would recommend our clients to subscribe to our Artificial Intelligence portfolio, thereby benefitting from recent technological trends.

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