By Stephen Nellis and Nivedita Bhattacharjee
Music streaming service Spotify on Wednesday filed for a direct listing of its shares, laying out financial data for the first time that cheered some analysts but led others to question how it could turn a profit from its growing subscriber base
Spotify, which wants to trade as SPOT on the New York Stock Exchange, is taking an unusual path to the U.S. public markets, with a direct listing that will let investors and employees sell shares without the company raising new capital or hiring a Wall Street bank or broker to underwrite the offering.
Because the company will not issue any new shares, it did not specify a listing price. Based on private transactions, it is valued at roughly $19 billion, according to Reuters calculations.
Spotify, launched in 2008 and available in more than 60 countries, is the biggest music streaming company in the world and counts services from Apple Inc, Amazon.com Inc and Alphabet Inc’s Google as its main rivals.
RISING SALES, COSTS IN CHECK
In the filing, Spotify laid out detailed financial data for the first time, showing rising revenue and relatively steady operating costs, which analysts took as a positive.
Revenue rose 39 percent to 4.09 billion euros ($4.99 billion) in 2017, from 2.95 billion euros a year earlier. Its operating loss widened to 378 million euros in 2017 from 349 million euros.
Its net loss ballooned 129 percent in 2017, driven mostly by financing costs related to a 2016 deal in which Sweden-based Spotify raised $1 billion in debt that would convert to shares upon an initial public offering.
“The revenue continues to grow but in particular their costs are growing slower than revenue, which is exactly what you expect in a business like this,” said Jay Ritter, an expert in initial public offerings and professor at the University of Florida.
Spotify compared its aspirations to the reach of Facebook and YouTube. “We believe the universality of music gives us the opportunity to reach many of the over 3.6 billion internet users globally,” it said.
With 71 million premium subscribers globally, Spotify has about twice as many paying customers as music streaming runner up Apple, with 36 million. Including those who listen to advertising-supported streams, Spotify has about 159 million monthly average users.
Amazon Music Unlimited has 16 million paying subscribers, and Pandora Media Inc has 5.48 million total subscribers
Google has not said how many subscribers it has to Google Play, its music streaming service.
Spotify‘s premium subscription costs $9.99 a month, but it said it saw great potential in its ad-supported service, which Apple does not offer.
“With our ad-supported service, we believe there is a large opportunity to grow users and gain market share from traditional terrestrial radio,” Spotify said.
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