SAN FRANCISCO — Spotify picked up more fans on Wall Street as investors gave the unprofitable company a warm welcome Tuesday in its stock market debut. Buyers appeared to be betting that the trend-setting music streaming service will maintain its early lead over Apple and other powerful challengers in music streaming.

After several hours of anticipation Tuesday morning, Spotify’s shares traded as high as $169 before falling back slightly. The stock closed at $149.01, well above its previous high of $132.50 in deals worked out during Spotify’s 12-year history as a privately held company.

The performance left Spotify with a market value of about $27 billion, according to FactSet. By comparison, internet radio station Pandora Media’s market value stands at $1.2 billion nearly seven years after it went public.

The market value of Spotify, trading as Spotify Technology SA, was among the 10 highest ever recorded by a technology company after its first day of U.S. trading, according to Dealogic. Chinese e-commerce company Alibaba Group holds the top spot at $234 billion after its market debut in 2014.

Spotify CEO Daniel Ek, who founded the company, emerged as the day’s biggest winner. His 27 percent stake in the Swedish company is now worth $7.4 billion.

The good vibes surrounding Spotify stem from its early lead in music streaming, a still-evolving field trying to hook people on the idea that it’s better to subscribe to online access to millions of tunes than to buy individual albums and singles.


Spotify has attracted 71 million worldwide subscribers so far and is aiming to increase that to as many as 96 million by the end of the year. It has 159 million total users, including people who are willing to listen to ads for access to free music.

By comparison, Apple’s nearly 3-year-old music streaming service has 38 million subscribers. A list of other formidable competitors that includes Google and Amazon also offer similar music streaming services, raising the specter of Spotify being wiped out by far richer rivals. Apple, Amazon and Google have amassed a combined $402 billion in cash compared with Spotify’s $1.8 billion.

Spotify’s success 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 has minted the company with a market value of $122 billion.

A $10,000 investment in Netflix’s 2002 initial public stock offering would now be worth more than $2.6 million, leaving some investors wondering if Spotify might be on a similar trajectory in music streaming.

“The similarities here, we believe, are much greater than the differences,” RBC Capital Markets analyst Mark Mahaney wrote in a recent research note assessing the parallels between Spotify and Netflix.

Besides blending technology with a subscription model to reshape a popular form of entertainment, Spotify and Netflix have a common executive in their lineage. Spotify’s current chief financial officer, Barry McCarthy, held the same job when Netflix went public and remained in that position until leaving the video service in 2010.


Unlike Netflix, Spotify still isn’t profitable, having lost more than $3 billion since it started more than a decade ago. Spotify has made it clear that it intends to remain focused on adding subscribers instead of making money for now.

Netflix has also set itself apart from its rivals in video streaming by spending billions on original programming such as “Stranger Things” and “The Crown.” Analysts are worried that will be more difficult for Spotify to do because it is primarily negotiating for the same music streaming rights as Apple, Google and Amazon – companies that can afford to pay even more, if they want.

“One of the big questions about Spotify is whether they can take it to the next level like Netflix has,” said Daniel Morgan, senior portfolio manager for Synovus Trust.

Spotify Technology SA made its Wall Street debut in an unconventional way. It used a “direct listing” on the New York Stock Exchange that allows the company’s early investors and employees to sell as many shares as they want whenever they want. That’s a departure from a traditional initial public offering in which a company and a few select investors first sell a limited amount of stock at a starting price determined by investment bankers who spend weeks gauging investor demand.

The direct listing could result in wild swings in Spotify’s stock pricing during the first few days of trading, especially since Spotify’s shares sold in a range of $48.93 to $132.50 in privately negotiated transactions during the first 11 weeks of this year.

“Normally, companies don’t pursue a direct listing. While I appreciate that this path makes sense for most, Spotify has never been a normal kind of company,” Ek wrote in a blog post.

“Our focus isn’t on the initial splash,” he wrote. “Instead, we will be working on trying to build, plan, and imagine for the long term.”

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