7/12/2017 Update: It is being widely reported this morning that Spotify has reached a new deal with Sony Music Entertainment for royalties. Now Spotify has a deal in place with Sony and Universal and the only big label missing is Warner Music Group. These royalty agreements are a key piece needed for Spotify to go public this year or next.
In May, multiple sources (including The Wall Street Journal) reported that Spotify may opt for a direct listing on the New York Stock Exchange rather than go through the IPO process that is much more expensive (but often more lucrative for the company). If this were to happen, it would not take place until the end of 2017 or later. Whether it chooses the direct listing or the IPO route, it looks like investors may be able to buy Spotify stock sometime in the not too distant future.
In recent news, Spotify announced via Twitter that it now has 50 million subscribers. We last heard from CEO Daniel Ek in September 2016 that Spotify reached 40 million paid subscribers which means the company has seen an increase of 25% in about 6 months.
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 TD Ameritrade has been in business for over 40 years and has no minimums so you can open an account with any amount. Additionally it consistently gets high reviews in the Barron’s yearly rankings of online brokers (3rd in 2017) so it is a great broker for all investors, no matter what their experience level is. (Full disclosure: TD Ameritrade is the broker I use for the portfolio on the front page of this website).
**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.