Spotify finally went public yesterday in a unique direct listing that had Wall Street watching the offering closely. The stock opened at a price of $165.90 per share but fell to $149.01 by the end of the day. The stock dropped down another 8% to $140.02 by midday Wednesday. That said, even at $140 per share, it was still higher than the predicted $132 that most thought it would open at.
In a surprise move, Sony Music, which owned 5.7% of Spotify’s stock, sold about 17% of it yesterday for a profit of around $260 million. It still owns about 4.7% of the company’s shares that are worth more than $1 billion at yesterday’s valuation.
All the major record labels have publicly stated that at least some of the money reaped from Spotify share sales would trickle down to their artists. The big question is, how much?
Record labels traditionally have taken any profits made from similar sales and moved the money directly their bottom lines with very little finding its way into artist’s pocketbooks. The expectation is that will happen once again, at least to some degree.
According to a Sony executive speaking to Music Business Worldwide, “Sony Music and The Orchard are committed to sharing with their artists and distributed labels any net gain they may realize from a sale of Sony Music’s equity stake in Spotify. This is consistent with our previously announced policy of sharing breakage and equity proceeds from digital catalog licenses with our artists and distributed labels.”
No one knows what will happen with Spotify stock in the future, but nearly everyone expects some volatility. According to Fortune, “Gabelli & Co analyst John Tinker rated Spotify a “hold,” which is often viewed by investors as a negative assessment given how infrequently analysts issue “sell” ratings. Two other firms, Redburn and SEB Equities, also came out with equivalent ratings.”
Many are rooting against Spotify at the moment, but remember that a healthy Spotify means a healthy music business, at least at this moment.