Spotify shares will be publicly traded for the first time on Tuesday, as the music-streaming platform tests the stock market.
The platform’s listing on the market proves to be a big day for the firm as it will gauge public opinion on whether it is able to make a profit for the first time in 12 years.
The Swedish company has grown rapidly in recent years, boasting 71 million paying customers. This is over twice the amount that its rival Apple Music (NASDAQ: AAPL) has.
However, competition is something Spotify needs to keep in mind.
“Spotify’s rivals are the biggest companies in the world with bottomless pockets,” said Mark Mulligan at MIDia Research.
“What if Apple decided: let’s throw ten billion at this and see if we can throw Spotify out of the water?”
Analysts have predicted Spotify’s potential to close the gap between revenues and the costs by recording companies for the rights to play their music.
Mulligan said: “Up until now it was the warm-up lap. When that’s done we’ll see a bit of a shift in strategy and direction.”
No new shares will be traded, but shares held by the firm’s private investors will be made available. This means that Spotify has not set a price for its shares in advance.
“This approach will save the company money, but will probably lead to volatility when the stock starts trading, as the market tries to find a price it’s comfortable with,” said Laith Khalaf of stockbroker Hargreaves Lansdown.
“The fact the company isn’t turning a profit means the price discovery mechanism of a direct float is even more likely to be choppy.”
Spotify is likely to shift its content in the future and focus on making original music and podcasts – seen by Taylor Swift’s music video, which was only available on the streaming platform.
