Spotify Technology SA, owner of the world's largest paid music service, will list shares on the New York Stock Exchange this year, but investors are not likely to be pleased with the company's figures.
Operating losses at the company were up at €378 million ($461 million) in 2017, against €235 million euros two years ago. The average user pays only €5.24 a month for a subscription, a drop of over 20 per cent from two years ago. Also the only other major online music company to go public, Pandora Media Inc is struggling.
However, according to commentators, there is a reason to believe the company's shares will soar once they start trading under the ticker symbol SPOT. The music-streaming company has much in common with another big-spending company: Netflix Inc.
Spotify made no direct comparison to Netflix in a Wednesday filing announcing its plans to list on the New York Stock Exchange. However, according to commentators, its pitch to investors rests on a similar thesis to the one driving Netflix shares, which are the best-performing on the S&P 500 this year. Spotify also has the same chief financial officer who took Netflix public, Barry McCarthy. Also Netflix's chief content officer Ted Sarandos sits on Spotify's board.
According to commentators, a direct listing is an unconventional way to pursue an IPO without raising new capital, helping the company eliminate the need for a Wall Street bank or broker to underwrite the public offer.
Spotify is present in 60 countries, with a total of 71 million premium subscribers and about 159 million monthly average users.
According to commentators, Spotify faces significant challenges to its business model, including risk from fluctuating and unpredictable royalty rates it pays to music labels, publishers, and songwriters.
"We set out to reimagine the music industry and to provide a better way for both artists and consumers to benefit from the digital transformation of the music industry," the company said in its filing. "Spotify was founded on the belief that music is universal and that streaming is a more robust and seamless access model that benefits both artists and music fans."