Music and video streaming company, Spotify is all set to make its stock market debut on Tuesday. It has almost 157 million customers worldwide and it is expected to be valued at $20 bn- $25 bn on its New York Stock Market flotation.
Why Spotify Is Issuing Its Shares
Spotify will not issue new shares, rather it will sell the already available shares held by its private investors. It has not set the price for its shares and hence company will have to see how it performs in the face of an apparent volatility.
But, its strong growth powered by a rapid increase in revenue is what makes it lucrative for investors.
Despite being a leading music streaming company and having more than 70 million paying customers, it has not been able to make a profit. The reason why the company has not been able to achieve economies of scale is that its costs for paying musicians and singers in term of copyrights exceed far more than the profit it makes. But, media reports suggest that gaps between its profits and costs are narrowing.
Being a tech stock will also make Spotify adopt changes.
All Eyes Set on Spotify
Swedish company’s debut of New York stock exchange has come in time when tech sector is already facing volatility. The month of March 2018, has not remained so lucky for the US tech stocks that fell by 6%. Leading IT firms like Amazon, Tesla and Broadcom saw a major a decline in their shares due to various factors.
Analysts suggest that performance of Spotify shares will also reveal about investors confidence in the tech sector. Consequently, it will allow Silicon Valley tech giants to decide whether they should trade their companies’ shares on the stock market or not. Briefly, Spotify’s debut on New York stock exchange will prove to be a case study for the rest of the firm in IT sector.
Future of Streaming Media
Spotify may also diversify its portfolio in future. It seems that company is looking to cash on the brand image that it has created in last decade. Media reports suggest that the music streaming platform might be looking for creating diversified content like podcasts, comedy and even profiles of musicians and singers.
Going public will also help Spotify to gain capital for its expansion while meeting the expectations of its investors. At the same time, its management will also face pressure to bring fast changes for meeting the requirements. Briefly, the music streaming medium might face a tough scrutiny after flotation of its shares.
