We love tech stocks on Buy Shares In. They’re frequently coupled with impressive IPOs, after which investors can usually expect to see great returns on their investments. We heard that Spotify was considering becoming a publicly traded company, and wanted to know how to buy Spotify stock. Here’s what we found out, and how you can buy shares in Spotify.
Can You Buy Spotify Stock?
At the time this article was written, it wasn’t possible to buy Spotify stock. However, as mentioned in the introduction, it’s been announced that Spotify is planning to become a publicly traded company, possibly before the end of 2017.
When most companies begin the planning stages of entering the stock markets, they consider, first, an IPO. An initial public offering is the first sale of stock by a company which is meant to raise capital for that company.
However, there’s another way that companies may choose to become publicly traded. This is called a DPO, or a direct public offering. A DPO is what Spotify executives have claimed to be researching, and it’s a bit different from a traditional IPO issued by most companies.
There are three reasons for a company to go public with an IPO. First, to raise capital for the company. Second, even private companies are owned by someone: there are stakeholders in every company, whether they be private investors or even employees. Going public gives those stakeholders liquidity. They can buy shares in a company at the IPO, or they can even cash out if they like. Thirdly, an IPO gives a company a value. Privately owned companies are not required to disclose financial information, but public companies are. This value is most commonly used when determining the details of an acquisition.
Spotify appears to be opting for a direct public offering. Let’s look at what a DPO is, and why Spotify may be choosing that route.
Do you remember the Snapchat IPO? If you need to job your memory, you can find an article about it on the Buy Shares In website. In summary, though, SNAP stock was offered back in March of 2017 at an initial public offering stock price of $17. When the markets closed that day, SNAP was trading at $24.48 per share. That was huge news for investors – 44% increase.
Four months later, those investors had lost all their money. By July, shares in SNAP were selling at $16.99 – that price was only a minimal loss for those who had bought shares at $17, but imagine the disappointment of those investors who had purchased shares at $24!
The direct public offering of Spotify stock will avoid this. A DPO skips all the hoopla of initial public offerings – quiet periods, underwriting fees and, frankly, embarrassment. The company, at present, doesn’t need to raise capital, so there’s no necessity to issue an IPO. And the value of Spotify stock will balance itself; the price of Spotify stock will be determined by the investors.
Spotify is currently valued at about $13 billion. However, a DPO would minimize the reporting requirements of the company prior to listing. The Securities and Exchange Commission would, of course, require the same disclosures from Spotify once the stock is publicly traded. But a DPO lessens the financial and administrative responsibilities of Spotify.
When Will Spotify Stock Be Available?
Spotify is not the first company to enter the exchanges directly. However, it is the first large tech company to do so. Spotify anticipates being listed on the New York Stock Exchange by the end of 2017, barring any trouble from the Securities and Exchange Commission.
Here’s how a direct public offering works. First, a company like Spotify will register with state administrators. Then, they develop a business prospectus. This prospectus is a sort of business plan, which outlines the past financial performance of the company and projects the future performance.
At this point, the financial reports of the company become publicly available, and the business undergoes an audit. Once the stock is available on the public market, the company is required to report to shareholders regularly. Usually this is done quarterly.
Traditionally, direct public offerings have been a tactic used by businesses which need to raise a lot of capital and skip the cost of an initial public offering. Spotify executives, it would seem, aim to raise money for the company but don’t want the hassle of a “normal” IPO.
It’s been reported that the Securities and Exchange Commission have been investigating Spotify’s unusual entry to the markets. However, this shouldn’t cause concern to investors. Spotify stock is likely to be available to investors at the end of this year or in early 2018. The SEC frequently examines companies a bit more closely if they enter the markets in a non-traditional way. Even Google, back in 2004, was under scrutiny after choosing a Dutch-auction format.
Likely Spotify Stock Price
Spotify stock will have competitors once it’s listed on the New York Stock Exchange. The most notable of these is Pandora (NYSE: P). Pandora, in 2011, issued an initial public offering at $16 per share. At the time, the company was valued at $1.9 billion. The stock price rose as high as in excess of $37 back in 2014, but today the stock is trading below $8.
Analysts anticipate that the Spotify stock price will depend largely on decisions the company makes within the next several months. The application, if you’re not familiar, offers streaming music either on a paid subscription or free basis. Music downloads are available to those who pay for the service, and those who opt for the free version still enjoy unlimited music.
It’s in this way that Spotify competes with Apple and Amazon. Both offer streaming music services and downloads, but both also offer the hardware to support it. Analysts recommend that investors look for announcements by the company in the coming months. Expansion of product offerings may make all the difference in the Spotify stock price, and in the success of the company as a whole.