Spotify officially files for an IPO in the US, wants to drum up $1b

Spotify has officially filed paperwork with the Security and Exchanges Commission for its widely anticipated public offering.

It seemed to have actually been done some weeks ago but only became official overnight (Australian time).

The IPO is for up to US $1billion as it fends off the fast rising challenge from Apple Music.

But the $1billion figure could change, depending on what Spotify’s bankers assess the demand to be.

According to the documents, its shares have traded between $37.50 and $125 each in private transactions last year, and as high as $132.50 this year.

At that evaluation, Spotify could be worth more than A$30.21 billion based on ordinary shares outstanding as of February 22.

The direct listing means Spotify does not have to raise further capital or need a bank to underwrite the process.

The Swedish streaming service will trade at the New York Stock Exchange under the SPOT symbol. It is not certain when this will begin.

Some interesting facts emerged from the documents.

As of December 31, Spotify had 159 million active users and 71 million subscribers – virtually double that of Apple Music’s.

In 2017 it generated €4.09 billion (A$8.4 billion) in revenue, a 38% rise from $4.6 billion in 2016.

But losses ballooned up 230% to €1.233 billion ($1.9 billion) in 2017, from €535 million ($640.4 million the year before).

It also had €109 million ($171,27 million) in free cash flow in 2017.

Documents showed that from July 1 last year, co-founder and CEO Daniel Ek made a deal with the Spotify board to forgo a regular base salary.

Instead, he would receive a bonus when the company attained performance milestones.

The first of these payments, made in February 2018, amounted to $1.28 million.

In its prospectus, Spotify played up to potential investors by highlighting it had given royalties of more than €8 billion in royalties ($12.5 billion) to artists, music labels and publishers since its launch in 2008.

It said, "Our mission is to unlock the potential of human creativity by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by these creators.”

It also spelled out its key role in reviving the fortunes of the global recorded music industry.

“When we launched our Service in 2008, music industry revenues had been in decline, with total global recorded music industry revenues falling from US$23.8 billion in 1999 to $16.9 billion in 2008.

“Growth in piracy and digital distribution were disrupting the industry.

“People were listening to plenty of music, but the market needed a better way for artists to monetize their music and consumers needed a legal and simpler way to listen.

“We set out to reimagine the music industry and to provide a better way for both artists and consumers to benefit from the digital transformation of the music industry.

“Spotify was founded on the belief that music is universal and that streaming is a more robust and seamless access model that benefits both artists and music fans.”