Spotify Shares Climb in Private Trades Before Public Listing, Tempting Labels to Sell
Any major that sold all of its stock at current prices would earn more than $1 billion, Billboard estimates.
Spotify stock is currently trading privately for about $5,000 a share -- or $125 a share after the company’s imminent stock split -- sources tell Billboard, up roughly 25 percent from early December, as the streaming company readies to begin public trading in coming weeks.
Spotify is expected to announce its official first day of trading on its "Investor Day" March 15, but investors are preparing to start trading shares as soon as March 26 and to start trading options in April. That gives shareholders -- including the major record companies -- two weeks to sell stock in the private market.
Several major-label executives told Billboard that their companies are focused on maximizing the value of their investments and may sell their stock if prices continue to climb in advance of trading on the NYSE. Spotify has warned that trading could be volatile and that the share price could "decline significantly and rapidly" out of the gate, once public. That's because the company is not offering new shares at a price range published by underwriters as it would in a traditional IPO, but rather allowing existing stakeholders to sell their shares to the public. If most of them unload, the price would drop; if most hold on, the price would rise.
There’s no guarantee that any existing shareholders will sell any of their shares, so there "may initially be a lack of supply of, or demand for, ordinary shares on the NYSE," its filing with the SEC states.
Against the pricing uncertainty, "we’re considering all our options," says one major-label executive.
Each major holds about 5 percent of the stock, although Sony apparently owns the most with 5.7 percent of Spotify shares. Any major that sold all of its stock at current prices would earn more than $1 billion, Billboard estimates.
Based on information available to Spotify, ordinary shares were trading privately during the year ended Dec. 31, 2017, between $37.50 and $125.00 in post-stock-split prices, and from Jan. 1, 2018, through Feb. 22, 2018, between $90 and $132.50, according to the filing.
While Spotify had yet to implement the stock split when it filed its registration with the SEC, its prospectus uses the post-stock-split numbers, with 40 old shares equal to 1 new share.