The IPO Buzz: Spotify on the Marquee

With the IPO market’s first quarter already swept into the history books, all eyes are on the big name on the marquee for the first week of April: Spotify Technology S.A. (SPOT proposed). This is the only offering on this week’s calendar – and it isn’t an IPO. This is a direct listing. Note: The company, Spotify, has nothing to do with this deal.

Spotify, based in Sweden, says it is the largest global music streaming subscription service. It has a presence in 65 countries and territories. Spotify believes that its platform, which had 157 million monthly active users (MAUs) and 71 million premium subscribers as of Dec. 31, 2017, “is nearly double the scale of our closest competitor, Apple Music,” the prospectus says. The company offers its users editorially curated and machine-generated playlists, drawing from more than 35 million tracks as of Dec. 31, 2017, according to the prospectus.

Spotify’s services let its subscribers search and discover music collections of friends, recording artists and celebrities; build a personal collection playlist; listen to music on demand and share music on Spotify, Facebook, Twitter, blogs and by email with friends – via an app by smartphone, tablet, laptop or personal computer.

This direct listing is offering up to 55.7 million shares, according to Spotify’s preliminary prospectus filed with the U.S. Securities and Exchange Commission. The deal is expected to start trading on the New York Stock Exchange on Tuesday, April 3, 2018.

Players and Possible Parameters

There are two parties involved in this offering: The sellers (the current shareholders) and the potential buyers (institutions and individuals). Anybody with a dollar, a dream, and the right price can get in on this offering.

The exact number of shares to be offered is not given nor is an offering price stated. These details will be announced Tuesday. However, there are some posted stories as to what to expect.

There are published reports that the recent private placement price was about US$137.50 per share. The guessing game on Wall Street and in other precincts is that Tuesday’s offering price could range from as low as US$120.50 to as high as US$132.50 – but time will tell.

What the Street Thinks

Nevertheless, a few investment advisory firms have issued research reports:

Atlantic Equities initiated coverage with an “Overweight” recommendation and a year-end 2018 price target of $160.

MKM Partners initiated coverage with a “Buy” recommendation and a 12-month price target of $200.

RBC Capital Markets initiated coverage with an “Outperform” recommendation and a price target of $220.

The only thing investors interested in buying Spotify can do is to do what anyone would do to buy any publicly traded stock: Call your stockbroker with an order.

Next Week: Nothing Yet

For the week of April 9, 2018, the IPO calendar is clean and green. Nevertheless, anything can happen when the SEC’s filing window opens again for business on Monday morning.

Stay tuned.

Disclosure: Neither the author nor anyone else on the staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and staff do not issue advice, recommendations or opinions.