The circumstance has left many wondering what it will mean for music streaming’s future.
The Spotify IPO has been labeled a powerful success, though many are now curious about what it will do to music streaming. The Swedish company now has a valuation of about $26.6 billion.
On its first day, Spotify’s market share skyrocketed but has fallen since that time.
The share prices fell following the Spotify IPO as a result of less-than perfect confidence in the company’s business model, reported Reuters. That said, the company’s performance may say a lot about the direction of the music industry. It is already considered to be an accurate reflection of the recording industry’s present state of transition.
Spotify didn’t take a traditional approach to its IPO. Instead, the mobile app and music streaming company used what is called a direct listing. This is much more commonplace among smaller companies and is used in industries such as biotech. It involves sales of shares directly to the public, without any need for intermediary participation.
“Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years,” said Daniel Ek, Spotify’s co-founder and CEO, in a blog post. “So while tomorrow puts us on a bigger stage, it doesn’t change who we are, what we are about, or how we operate.”
The Spotify IPO was the largest company ever to use a direct listing in order to go public.
Spotify’s initial public offering was also the first direct listing to occur on the New York Stock Exchange (NYSE).
Investors have voiced some concerns over Spotify’s current business model. They have also expressed some discomfort with Apple Music.
Ek explained that Spotify IPO is not being used to raise capital. At the same time though, the firm does require some funding. Spotify’s current annual revenues are about $5 billion. That said, about three quarters of that amount are paid out in royalties to artists, songwriters, producers and labels. Most of that is controlled by the Big Three: Sony Music Entertainment, Universal Music Group and Warner Music Group.