Was Spotify's Direct Offering Really So Brilliant? SPOT Shares Slip to $104 as $17 Billion In Market Cap Goes Poof

Spotify’s non-traditional ‘direct providing’ was as soon as lauded as genius. Now, it’s difficult.

Spotify’s ‘non-IPO IPO’ bucked considered one of Wall Street’s most cherished traditions, and minted billionaires in a single day.  And as Spotify’s shares soared in direction of $200, naysayers within the monetary sector began to look slightly stodgy.

Meanwhile, scores of different firms began cooking up their very own Spotify-like Wall Street choices, with conventional underwriters and banks shortly beginning to adapt.

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But possibly that was a bit untimely.

Now, as Spotify’s inventory threatens to sink under $100, a sobering rethink could also be so as.  Especially for these holding the bag on fast-sinking shares.

In Friday buying and selling, Spotify shares took one other tub.  Buy the bell, SPOT shares completed at $106.84 after scraping one other all-time low of $104.60.

That represents a near-50% drop from July peaks, and a wipeout of practically $17 billion in market cap.  The determine is sort of unimaginable, particularly in such a brief time frame.

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The declines are additionally outpacing declines in broader market indices, together with the S&P 500 and Dow Jones Industrial Average (DJIA).

Of course, it’s laborious to name Spotify’s providing a failure, particularly with SPOT’s market cap nonetheless valued at $19 billion.  And for anybody cashing out close to the highest — together with Warner Music Group and Sony Music Entertainment — this is the stuff of genius.

Also not complaining: Spotify executives who cashed out their coveted shares, particularly these with low strike costs.

And let’s not overlook that what goes down can shortly return up.  Bottom-feeders are already surrounding Spotify, and shares might get better in 2019 if greed replaces concern.

Spotify shares land at $106.84 on Friday, December 21st, after scraping $104.06, another all-time low.

Spotify shares land at $106.84 on Friday, December 21st, after scraping $104.06, one other all-time low.

But the place’s the underside, precisely?

That’s an more and more difficult query, with Spotify getting smacked by some severe market headwinds.  That contains the distinct risk of a protracted U.S. authorities shutdown, with President Trump threatening to veto any spending invoice that doesn’t embrace $5 billion in border wall funding.

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Meanwhile, a nasty mixture of rising rates of interest, sinking fortunes abroad, and looming commerce battles is placing a damper on once-bullish Spotify enthusiasm.  It additionally seems to be focusing buyers round precise monetary fundamentals, as a substitute of broader long-term enthusiasm.

On that observe: Spotify did report a revenue over the last quarter, however that was a technicality primarily based on the corporate’s holdings of Tencent Music Entertainment.  Just lately, Tencent spun its streaming music property public, however the outcomes have been lackluster — and sinking TME shares might have a dangerous affect on Spotify’s future monetary quarters.