Spotify to offer investors $10bn shares download

Spotify, the world’s most popular music streaming service, is considering a direct listing of its shares on an American stock exchange this year with a target valuation of $10 billion, it emerged last week.

Instead of an initial public offering, where investors buy a block of shares at a set price before the stock begins trading on the open market, the Swedish company would register its shares on an exchange and let them trade freely when the market opens.

Spotify, one of Europe’s most valuable start-ups, has more than 100 million users, including 50 million paying subscribers. The company has kept its nose ahead of its rival Apple Music despite a concerted push by the latter to win market share over the past two years.

A listing would bring about a substantial payday for Daniel Ek, 34, and Martin Lorentzon, 48, the founders of Spotify. Precise details about their shareholdings in the company are unknown but the fortune of Mr Ek has been estimated at $400 million. Spotify employs about 2,000 people, many of whom hold equity and share options.

A direct listing is one of several options being considered by the company. Such an approach would not provide a guaranteed cash injection and would put it at the mercy of volatility in the markets. However, it would save millions in bankers’ and brokers’ underwriting fees.

The company could list as early as September and has not ruled out a traditional IPO. Spotify’s potential pursuit of a direct listing was first reported by Mergermarket.

Spotify has an additional financial incentive to go public. Last year it issued a $1 billion convertible bond with an interest rate of 5 per cent that increases by 1 percentage point every six months until the company lists.

It raised $526 million on in its last funding round in June 2015 at a valuation of $8.5 billion. It has since expanded its paying and non-paying subscribers.

A basic subscription to Spotify costs £9.99 a month or $9.99 in the US. The company also runs a free ad-supported service that has attracted about 50 million users.

Spotify has about twice as many paying subscribers as Apple Music. Spotify also competes with Google Play, Deezer, Tidal and Amazon Prime Music.

Snap’s $3.4 billion debut on the New York Stock Exchange last month was a high point in an otherwise lacklustre market for IPOs in the US. Last year American investment banks generated less from share sales than at any point in the previous 20 years, figures from Dealogic, the data provider, showed.

Snap shares were trading at $20.31 in New York yesterday. The company was first listed at $17 a share.