Spotify's reference share price set at $132 ahead of NYSE debut

The Swedish company took an unusual step listing directly onto the New York Stock Exchange, which could make the stock volatile.

But it is also a strategy that has analysts uncertain of the company's prospects, as it heightens the risk of a chaotic and unpredictable market debut. This also means that the company won't have a share opening price. This is kind of true in all new stock listings, but it's especially true in Spotify's case. More than 70 million people now pay Spotify an average of about $5 a month to access 35 million songs, plus playlists and podcasts.

The exchange itself, however, didn't have things quite right.

Wall Street offered a timely reminder of the volatility that can affect firms reliant on the promise of things to come, as electric auto firm Tesla's shares slumped almost 7% in early trading on Monday.

But in the long-run, Spotify's performance in the stock market will largely depend on investor philosophies about the company and its business model. Or will they vehemently disagree?

As you can see in the chart below, in 2017, Spotify shares were bought and sold privately for anywhere between $125.00 and $37.50, which is a pretty wide range.

Spotify is set to directly lists its shares on the public market Tuesday, and without the full involvement of an investment bank helping to set the price, volatility in the stock price may lie ahead.

At Spotify, none of that is happening.

The direct offering should give retail investors opportunities to buy in at the same price as hedge funds and other big investors, which normally get first dibs on IPOs thanks to their relationships with underwriters.

Spotify's early lead in music streaming has drawn comparisons to Netflix, which built upon its pioneering role in DVD-by-mail rentals and then video streaming to create a hugely successful, subscription-driven franchise that has produced spectacular investment returns and left the company with a market value of $122 billion. As at March 21, Spotify had 178.1 million ordinary shares outstanding, according to a filing. That's a question mark. It is also not known at what price the stock will start trading Tuesday. But Morgan Stanley and, particularly Citadel, are staking their reputations on ensuring there's an orderly market for Spotify's shares-especially the first day.

All these unknowns may not matter.

But the service, which will begin trading on the New York Stock Exchange (NYSE) under the name SPOT, faces a tough test in seeking to become profitable as a public company.

Financial Times "There is bullish sentiment about the company in spite of the recent downdraft for Big Tech shares on Wall Street".

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  • Arturo Norris