SAN FRANCISCO (AP) — Spotify’s opening act on Wall Street struck a chord with investors betting the unprofitable company’s trend-setting music streaming service will maintain its early lead over Apple and other powerful challengers.
After several hours of anticipation Tuesday morning, Spotify’s shares traded as high as $169 in their stock market debut before falling back slightly. The stock closed at $149.01 — well above its previous high of $132.50 in deals worked out during Spotify’s 12-year history as a privately held company.
The stock market’s warm welcome left Spotify with a market value of about $27 billion, according to FactSet. By comparison, internet radio station Pandora Media’s market value stands at $1.2 billion nearly seven years after that company went public.
The performance left Spotify’s market value among the 10 highest ever recorded by a technology company following their first day of U.S. trading, according to Dealogic. Chinese e-commerce company Alibaba Group holds the top spot at $234 billion after its market debut in 2014.
Spotify CEO Daniel Ek who founded the company, emerged as the day’s biggest winner. His 27 percent stake in the Swedish company is now worth $7.4 billion.
The good vibes surrounding Spotify stem from its early lead in music streaming — a still-evolving field trying to hook people on the idea that it’s better to subscribe for online access to millions of tunes than to buy individual albums and singles.
Spotify has attracted 71 million worldwide subscribers so far and is aiming to increase that number to as many as 96 million subscribers by the end of the year. It has 159 million total users, including people who are willing to listen to ads for access to free music.
By comparison, Apple’s nearly 3-year-old music streaming service has 38 million subscribers. A list of other formidable competitors that includes Google and Amazon also offer similar music streaming services, raising the specter of Spotify being wiped out by far richer rivals. Apple, Amazon and Google corporate rival have amassed a combined $402 billion in cash compared to Spotify’s 1.5 billion euro ($1.8 billion).
Spotify’s success in music streaming has drawn comparisons to Netflix, which built upon its pioneering role in DVD-by-mail rentals and then video streaming to create a hugely successful, subscription-driven franchise that has produced spectacular investment returns and has minted the company with a market value of $122 billion.
A $10,000 investment in Netflix’s 2002 initial public stock offering would now be worth more than $2.6 million, leaving some investors wondering if Spotify might be on a similar trajectory in music streaming.
