Published: Thu, April 05, 2018
Sci-tech | By Eric Barnett

Spotify shares drop 8.5% in their second day of trading

Spotify shares drop 8.5% in their second day of trading

Spotify Technology shares climbed from their reference price after it began trading through a direct listing on Tuesday.

Sony maintains the rest of its Spotify stake, said Cony Corp - at least for now - and, despite anticipating some ups and downs on the NYSE, is confident of further profit.

Analysts' advice, however, is that companies are not to be misled by Spotify's first day on the market. It follows the Trump administration's plans to slap steep tariffs on $50 billion worth of Chinese imports.

Some experts warned ahead of Spotify's debut that a direct listing opened the streaming giant up to early volatility, without underwriters or early major investors. "It's not manipulated or set by any puts and takes by banks or institutional investors", Chi-Hua Chien, an early investor in Spotify who is now at San Mateo, California-based venture capital firm Goodwater Capital, told Reuters.

No Initial Public Offering means that there are no investment banks to underwrite (or sponsor) and price the offering. However, the company was advised by Goldman Sachs, Morgan Stanley and Allen & Co. prior to the offering.

Spotify started publicly trading on the New York Stock Exchange on Tuesday.

This approach will save Spotify tens of millions of dollars in fees.

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In the United States, the largest music market, revenue from recorded music grew a robust 16.5 percent in 2017, marking the first time since 1999 at the dawn of online music that the business has expanded for two years in a row.

The company says it has now sold a total of 46,161,905 shares of stock with the IPO, which would bring the total proceeds to $969 million before underwriting expenses.

It seems we can expect big things from Spotify.

Spotify can also point to some of the more volatile stock market debuts endured by other tech companies. "Normally, companies don't pursue a direct listing", Ek wrote in a public post.

Shares of Snap, the company behind Snapchat, flew to a 44% premium on the day they came to market in March a year ago.

Their music-streaming services are additive to their user ecosystems, which leaves Spotify essentially alone in the quest to design models to keep its business profitable.

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