Spotify, the world’s largest music streaming service, has filed for an initial public offering valuing the company at $1 billion. The Sweden-based company co-founded by Daniel Ek, who has remained its CEO since its 2006 inception, and Martin Lorentzon has more than 71 million paying users as of December 2017. The company also enjoys an overall user base that includes ad-supported free listeners 159 million, far outpacing the competition from Apple, Google, Tidal, and others. Spotify will trade on the New York Stock Exchange under the symbol “SPOT”.
Spotify will be offering a direct listing, meaning thats its shares can traded on the open market sooner than with a more conventional IPO, as Spotify doesn’t intend to raise a large amount of capital with its IPO.
The filing gives us one of our best looks yet at Spotify’s finances, which the company lists at €4,090 million (roughly $4.99 billion) for 2017, although the company still posted €1,235 million (~$1.5 billion) in net losses for the year. Also included is the latest update on Spotify’s total users, with 159 million monthly active users and 71 million paid Premium subscribers as of December 31st, 2017. Paid subscribers grew 46 percent year-over-year last year, while active users are up 29 percent. By comparison, Apple Music still only has 36 million paid subscribers, although its forecasted to potentially surpass Spotify by this summer.
Despite its success over the years as one of the earliest and most promising music streaming businesses, Spotify has struggled to turn a profit given razor-thin margins of streaming, with most of its revenue dedicated to paying licensing fees to music publishers. Spotify has at times dabbled in other arenas, like original video content, but it has failed to materialize any substantial revenue streams beyond the monthly membership fee it extracts from paying subscribers and the ad revenue it earns from free listeners. Neither revenue streams have been able to adequately cover the exacting licensing demands of labels, with which Spotify is forced to negotiate with to continue providing the same breadth of music it has in the past.
In January, Spotify filed paperwork to be listed on the New York Stock Exchange, and the Financial Times reported that the company had hired Morgan Stanley, Goldman Sachs, and Allen & Co to advise it on its IPO. Spotify’s last valuation was at $8.4 billion when it raised a financing round of $400 million back in 2015.
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