9/15/2016 Update: CEO Daniel Ek revealed in a Tweet yesterday that Spotify now has 40 million paid subscribers which is more than double what Apple Music has. It is now widely believed that Spotify is planning on having an IPO in 2017 and those healthy subscriber numbers will help make that possible. Including free accounts, Spotify has more than 100 million active users.
In August, a report circulated that Spotify was having trouble renewing its contracts with music industries record labels over a dispute about rates. Apple Music pays the labels 58% and Spotify wants to renew their deals at the current 55%. But the labels believe this is the time to try to get Spotify up closer to the percentage that Apple pays and thus the impasse. While Spotify hasn’t been hurt in their subscriber numbers by the roll out of Apple Music, this shows that Apple’s deep pockets can ultimately make it very difficult for Spotify to grow and prosper.
You cannot buy Spotify stock right now because it is a private company. That means there is no Spotify stock symbol or price because the company is not traded publicly and probably won’t be until 2017 or later. (The stock symbol is NOT SPTF)
Spotify has been looking at the possibility of an IPO but there is no official news from the company as of yet. Its #1 competitor, Pandora (P), went public 5 years ago in June 2011 and its stock price has been up and down since then. Pandora has proven that there is an investor appetite for music streaming stocks and Spotify is poised to get its share of those IPO dollars if it chooses to do so.
The Spotify IPO (if it happens)
Spotify is one of the top music streaming services along with Pandora but now Apple Music has gone live and is getting great reviews. Apple has also debuted a 24/7 radio station called Beats 1 that goes out to 100 countries and is available for free for anyone who has an iOS device. Is there room for three big streaming music services along with some smaller ones? Right now neither Spotify or Pandora are making money and the entrance of Apple Music should make things a bit harder for them. Even Google and Amazon are reportedly getting into the music streaming business so the competition is fierce.
Right now with all its funding from private sources eclipsing $1 billion dollars, Spotify is estimated to be worth about $8.5 billion dollars if it were to have an IPO. It has recently added video to its service in an attempt to keep ahead of the competition. Spotify better go public as soon as possible because if they wait too long and its popularity wanes, the investment community may not value the company as highly as it would right now.
How To Buy Spotify Stock
If Spotify does go public sometime in 2017 or 2018, investors will want to get the stock at the IPO price if they can. Unfortunately, that is not possible for most individual investors (if you are reading this that means YOU!). Many behind the scene deals are made and only investors with insider connections are able to get in at the initial IPO price before the market opens.
Regular investors like you and me will have to buy Spotify stock on the first day it goes public AFTER the market opens. That means you need an online discount broker account to buy stocks and OptionsHouse lets you make all stock trades for just $4.95 per trade. That is one of the lowest rates available as many online brokers charge double that. Additionally, OptionsHouse always gets good reviews by financial magazines like Barron’s so why pay higher trade fees elsewhere? OptionsHouse is great for beginners all the way up to advanced traders and there is no account minimum so people just starting to invest can do so easily.
**One of the most common mistakes new investors make is they never actually follow through and get started buying stocks. Therefore, after opening your account which shouldn’t take more than 30 minutes, it is important to put money in it (called funding) so that you can buy Spotify stock when the company has its IPO. I would also suggest doing some research and finding another stock you like and buy it so that you can get the investing phase of your life started.
Spotify Stock Might Be Volitile
The first day of trading is often hectic for IPO’s so it could be a good idea to wait a week or two until things settle down. Sometimes an IPO stock goes down right from the start and sometimes enthusiastic investors bet it up right away. Waiting to see what other investors think via the price movement is often a good idea, especially for beginner investors.
Initial public offerings are no guarantee of a good investment and many companies fail after they start selling their stock. Before you jump in and buy Spotify stock, make sure you understand the risks and are ready for the stock to perform poorly or well, as it could go either way.