Spotify hires advisers on direct NYSE listing option
Music streaming company looking to trade stock on open market without fundraising
Spotify has hired Morgan Stanley, Goldman Sachs and Allen & Co to advise on a public listing on the New York Stock Exchange, according to a company spokesperson.
The Swedish music company is considering listing its shares directly on the NYSE, instead of a traditional public offering, according to people briefed on the plans.
Spotify does not feel it needs to raise new money, said one person familiar with the company’s plans, which makes a direct listing, through which investors would trade shares in the open market, an attractive option. However, a final decision had not yet been made, the person added.
Goldman Sachs, Morgan Stanley and NYSE declined to comment. Allen & Co did not respond to a request for comment.
Spotify has raised more than $1.5bn and was valued at $8.5bn in a funding round last year.
The pioneer of music streaming has been sealing long-term licensing contracts as it strives for a sounder financial footing ahead of a public listing. Spotify last month struck a multiyear licensing deal with Universal Music, the world’s largest record label, passing a critical hurdle in its path to going public.
The company has also reached a deal with Merlin, the agency that represents more than 20,000 independent record labels and Spotify’s fourth biggest supplier of music.
Spotify is now in active negotiations with Warner Music and Sony Music, the other two of the big three record labels which together hold licensing rights to the vast majority of Spotify’s catalogue. The big three labels each hold minority stakes in Spotify.
Spotify last month said that it had reached 50m paying customers, underscoring its role in driving revenue growth for the music business in the past year. Spotify’s closest rival, Apple Music, has 20m paying subscribers, providing the most lucrative streaming customer for record companies.
Spotify has added customers at a scorching pace, despite growing competition from technology companies such as Amazon, Google and Apple, signing up 20m new paying customers in the past year.
Music streaming has powered the fastest growth for the music business in nearly two decades, helping offset shrinking digital and album sales. Sales from streaming last year powered the fastest growth for the US music industry since 1998, as revenues from paying streaming customers grew 114 per cent to $2.5bn.
However, the field has become crowded, and streaming companies are hampered by the hefty royalty fees they pay to the record labels.
Spotify incurred a net loss of €173m in 2015, despite revenues growing to €1.95bn, as royalty and distribution fees jumped to €1.63bn.
Pandora, the other major independent streaming company, this week stepped up its hunt for a buyer amid deepening losses.