Analysts have been busy predicting the outcome of today’s Spotify IPO on the New York Stock Exchange - although several factors mean it’s more unpredictable than most tech debuts.
The market valuation is widely tipped to be more than $25 billion (£17.8 billion) based on private trading in the ‘grey market’ that has seen shares go as high as $150.
Online trading business IG Group is anticipating a market capitalisation of $24 billion (£17.1 billion) on day one, around $133 per share - though that’s down from a previous prediction that reached a high of $29 billion (£20.1 billion), or $160.70 per share. In its filing documents, Spotify has said it has sold shares for up to $131.88.
But the untraditional direct listing makes Spotify a potentially more volatile IPO without an investment bank on hand to shore up the share price (it also means there are none of the usual fees). Spotify is not seeking fresh capital from the IPO, hence the direct listing - a move that could influence other highly-valued technology companies.
As well as the Swedish company’s unusual approach to its IPO, Spotify has apparently opted for a low-key launch rather than any stock exchange bell-ringing from CEO Daniel Ek.
A few hours ahead of the IPO, EK wrote on the company blog: “Of course, I am proud of what we’ve built over the last decade. But what’s even more important to me is that tomorrow does not become the most important day for Spotify.
“It’s the day after, and the following day that matters — and all those days to come. Because that’s when we will continue the hard and important work of our mission: To unlock the potential of human creativity — by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by it.
“Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years. So while tomorrow puts us on a bigger stage, it doesn’t change who we are, what we are about, or how we operate.”
Spotify has itself warned that the direct listing process could result in volatility. Under the IPO conditions, there’s no urgency for current Spotify investors to sell immediately so a lack of available stock could force the price up to unsustainably high levels.
The share trading may not even begin for some hours after the market opens today as financial advisers Morgan Stanley (whose COO David Solomon reportedly made the bank’s winning pitch to Spotify by referring to his sideline as DJ D-Sol) works with the NYSE to match buyers and sellers to come up with an opening price.
The price of Spotify shares will also depend on more long-term considerations. The streaming company has issued guidance to potential investors admitting that it will remain unprofitable in the year to come. But it is powering ahead in terms of subscribers, targeting growth in voice-activation and automobiles and has strong relationships within the music industry.
Recent tech IPOs saw Dropbox valued below expectations but then surge after its launch, while Snap has seen its share price fall since its stock market debut last year.
Ek added: “Normally, companies ring bells. Normally, companies spend their day doing interviews on the trading floor touting why their stock is a good investment. Normally, companies don’t pursue a direct listing. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company.
“As I mentioned our Investor Day, our focus isn’t on the initial splash. Instead, we will be working on trying to build, plan, and imagine for the long term. Sometimes we succeed, sometimes we stumble. The constant is that we believe we are still early in our journey and we have room to learn and grow.
“I have no doubt that there will be ups and downs as we continue to innovate and establish new capabilities. Nothing ever happens in a straight line — the past 10 years have certainly taught me that. My job is to ensure that we keep our foot on the pedal during the ups, so that we don’t become complacent, and that we continue to stay the course with a firm grip on the wheel during the downs.”
Ek's visionary approach to the streaming market may yet collide with the reality of hugely powerful competitors in the form of Amazon and Apple - both have been giving bullish briefings about their recent growth.
Whatever happens, Spotify is certainly set to be one of the biggest tech IPOs of recent years. It now remains to be seen whether the stock soars like Facebook, stagnates like streaming rival Pandora or finds a happy medium.