Spotify IPO could be imminent
Speculation is rife that the online streaming service Spotify could be headed for an IPO, which will be music to the ears of investors after the success of Twitter last year
Spotify, the popular online music streaming service, could be heading closer and closer to an initial public offering (IPO) in the US. The Financial Times reports this morning that Spotify is negotiating a $200m credit facility with several large banks – a sign that the company is indeed on the verge of going public.
Many will draw comparisons to other high-profile internet IPOs in recent years. When Facebook went public in 2012 it was valued at $104bn, but a disappointing market performance was actually seen to have damaged the company’s investment prospects as share prices fell well below expectations. Twitter, on the other hand, had a wildly successful IPO, taking the NASDAQ by storm. Twitter’s success quieted fears of another Dot.com bubble, as the company was seen as a more solid choice for investment because of its age – seven years old at the time of going public.
A recent valuation in November last year estimated the Swedish start-up was worth $4bn
Spotify is a little younger, turning six this year, but rapid growth of its user base will put the company in good stead should the public offering occur. Last week the company bought music algorithm company The Echo Nest for an undisclosed sum. The deal will allow Spotify to further improve their music discovery service and playlist recommendations.
Before Facebook and Twitter went public they both took similar steps to Spotify – acquiring a credit facility and making a big acquisition – further fuelling speculation that an IPO is imminent. Spotify will have to bear these recent examples in mind, but they will see the banks’ willingness to provide a credit line as a good sign. Investors too will be watching closely. A recent valuation in November last year estimated the Swedish start-up was worth $4bn.
Launched in 2008 by a small team in Sweden, the service currently has around 24m users, of which six million are paying subscribers. The service offers an estimated library size of nearly 20m songs, with 20,000 added each day, although catalogue size varies depending on the user’s country because of the deals the company negotiates with the record labels. Spotify have not commented on the speculation yet, but for now it seems investors can almost taste the next big Internet IPO on the horizon.
