美国国家公共电台 NPR Spotify's Unusual IPO Model Will Test The Company's Strength

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DAVID GREENE, HOST:

Spotify, the music streaming service, is popular and also unprofitable. And now Spotify is planning a very unconventional initial public offering. Embracing its status as an industry disruptor, Spotify's breaking with convention and opting¹ to launch its IPO without the help of an investment bank. As Charles Lane from member station WSHU reports, not everyone is convinced this is such a good idea.

CHARLES LANE, BYLINE²: Typically how IPOs work is the company going public hires a big investment banker, several of them, to both issue new shares and then go out and sell them. But Spotify plans to simply list its shares on the market and then let them trade. George Parker is a finance professor at Stanford. He says this is almost unheard of.

GEORGE PARKER: To me, that is very analogous³ to a person that puts a sign out on the street and says this property is for sale by owner.

LANE: It's like saying, I got the coolest house on the block, everybody will want to buy it - so why give a cut to a broker⁴?

PARKER: Spotify, by doing this, is very confident that the public already understands Spotify's value and that it does not need others to tell the story.

LANE: Some analysts⁵ estimate this could save the company as much as $300 dollars in fees. Also Spotify's current private investors⁶ can simply cash out without waiting for the traditional lock-in period to end. From this perspective, a direct listing is just a more efficient way to IPO.

KATHLEEN SMITH: We don't think this is at all another way to go public. It's an inferior way, a defensive⁷ way to come out into the public market.

LANE: Kathleen Smith is founder⁸ of Renaissance⁹ Capital. She says in 2016, Spotify got an unusual loan from a group of private investment firms, including Goldman Sachs. The investors demanded a number of conditions to the loan.

SMITH: Suggesting that the investors thought the company's private valuation was way too high.

LANE: Spotify boasts a 140 million users, but most of them don't pay. They listen to the ad-supported stream, and ad revenue is only $300 million a year, a fraction of what the service truly costs. Spotify recently announced plans to move more aggressively into podcasting and multimedia¹⁰ news, a space where ad revenue may be more lucrative¹¹. Jake Shapiro, CEO at the podcasting platform RadioPublic, says global podcasting ad revenue is about $250 million a year.

JAKE SHAPIRO: But by all measures it's growing by leaps and bounds, and we anticipate doubling and tripling or more of that revenue in the coming months and years.

LANE: So if Spotify's plans are successful, it would be positioned to take advantage of that growth. But right now Spotify is still an unprofitable company pushed towards an IPO by private equity¹² firms eager to cash out. Smith says mom and pop investors won't buy it.

SMITH: Investors have been more cautious about companies that don't make money.

LANE: Spotify's IPO is scheduled for late March or early April, but many details remain to be worked out. For NPR News, I'm Charles Lane.