Spotify's Direct Listing in Planned Tuesday IPO Carries Uncertainty, Says Analyst

Spotify’s direct listing on the New York Stock Exchange Tuesday (see 1803150053) could pave the way for other pre-IPO companies to choose a similar alternate route to going public, but the deal carries a “high degree of uncertainty” since 91 percent of the 178 million shares will be set by broker-dealers based on buy and sell orders, said Renaissance Capital IPO Research in a Friday investor note. Spotify has 71 million Premium subscribers, who generated 89 percent of Q4 revenue, said the analyst, noting that’s twice as many paying users as its nearest competitor, Apple Music. Spotify’s 90 million ad-supported monthly active users provide “a long runway for growth,” said Renaissance. Though Spotify has yet to make a profit, “it has achieved positive free cash flow, and has offset declining ARPU [average revenue per user] by decreasing churn and improving gross margin,” it said.