Private trades in Spotify shares are valuing the music streaming company at about $16 billion, according to people familiar with the deals, raising the prospect of a bumper flotation next year.
That is around $3 billion higher than in similar trades up until June, the people said, adding strong demand for the shares and rising subscription numbers at the Swedish business meant it could be worth at least $20 billion when it goes public. The market for shares prior to their public listing allows employees and founders of big name private companies such as Spotify, Airbnb and Uber to cash in on some of their paper wealth, while letting other investors get a head start on the listing. Early investors tired of waiting for a payout are selling shares too.
While this secondary market was hit by Facebook's chaotic listing in 2012, it has recently made a comeback. A $13 billion price tag would value Spotify, the world's biggest music streaming company with more than 140 million active users, at around four times its 2016 sales. But investors and sector bankers not involved with the company said Netflix's valuation of seven times expected 2017 sales was a more appropriate benchmark, supporting speculation of a price tag of at least $20 billion around listing. Spotify is aiming to file its intention to float with U.S. regulators towards the end of this year in order to list in the first or second quarter next year, one of the sources said.
An investor survey led by technology investment and advisory firm GP Bullhound, which owns shares in Spotify, estimated the company's valuation could reach $50 billion in a few years. Worldwide, music streaming revenue leapt 60.4 percent in 2016, lifting recorded music sales for the second consecutive year after 15 years of decline during which revenue dropped by nearly 40 percent, according to data compiled by the International Federation of the Phonographic Industry.