Spotify (NYSE: SPOT)
Spotify has filed with the Securities and Exchange Commission (SEC) to be listed on the New York Stock Exchange (NYSE). In the paperwork presented to SEC, Spotify says it found material weakness in its internal system over financial reporting concerning unsatisfactory review procedures and financial statement preparation in the last three fiscal years.
The company has already won the hearts of listeners and the music industry worldwide with its music streaming service that instantly avails millions of songs.
As opposed to the usual initial public offering, the company will go for direct share listing, a rare process where no stock is issued. Nonetheless, insiders and existing investors can buy and sell their shares in the exchange market.
The listing could, however, face a shakier reception in the market because Spotify is shunning away from Wall Street banks to help it raise new capital. The banks usually spend time assessing the demand for the shares of a company by investors and attempt to pair the amount that rams the market to make sure the shares are sustained.
According to Spotify’s prospects, investors trading its shares privately have valued the music streaming service company as highly as $23B. The company will trade is shares under SPOT ticker symbol. Nonetheless, even as it seeks to take on Wall Street, there is no indication when its shares will begin trading.
Spotify said that it is aiming to unlock human creativity potential by offering one million creative artists a chance to earn a living out of their talents and billions of fans a chance to be inspired by these artists. The company has been a formidable force in the music industry, through the streaming model it has developed. The global music market had declined for more than a decade until it took a turn around three years ago with Spotify’s entry.
The Recording Industry Association of America reports that 66% of the country’s recorded music revenues are generated from streaming. The Association further adds that streaming platforms such as Spotify, YouTube, SoundCloud and Apple Music have become the green outlets where artists develop and money is made.
According to Spotify’s filing with SEC, the company had revenue of nearly $5 billion last year, up 38.6% from 2016. The revenue had grown by 52% in 2016. Spotify started its online streaming service ten years ago in Sweden before entering the United States market in 2011.
By the end of last year, the company had a user base of 159 million, including seventy-one million who are subscribed to its pay package; the others, using its freemium model which is marketing hallmark of the company. The model gives users free music access but subjects them to advertisements.
Despite its rapid growth, Spotify has also had to grapple with losses. In 2017, it reported $1.5 billion net loss, up from about $648 million in the previous year. The largest expense the company faces is the licenses cost from music publishers and record companies.
The company’s largest stakes are owned by Daniel Ek and Martin Lorentzon; its two founders. Mr. Ek and Mr. Lorentzon own 37.3% and 43.1% voting rights respectively in the company.