Naturally, investors are going to want to know if the shares are worth it, so here is everything you need to know before you invest in the newly entered Spotify.
After Snap made its stock market debut the year before, Spotify is the largest tech company to also go public. It currently has over 157 million users, half of who are on a premium subscription. However, its IPO is a lot different than what it is from Snap. Plus Spotify will not be making any money out of it.
Buy Spotify Shares in the UK
Traders from the UK have many choices to choose form.
If you are new to buying shares, I recommend to go with a broker like eToro.
eToro is a popular UK broker, that lets you guy Spotify shares easily.
Why you should buy shares
- Considerable revenue growth over the last few years expected to be over 5.3 million pounds by the end of this year. Plus, there are many new markets and economies that are still untapped
- Also expected to aid growth are updates on user experience for both artistes and listeners
- Every new premium subscriber comes at a cost of around 9 pounds sterling. However, the returns will break even if that subscriber stays past 12 months. A lifetime subscription is currently worth 25 pounds
- With a claimed estimate of more than 40% in global music streaming shares, Spotify is in a prime position to make all kinds of bargains with artistes and record labels
- No debts to be concerned about as long as the company stays afloat
Why you should not by shares
- At present, Spotify is yet to turn a profit. All bets are on its future earnings
- A significant threat posed by rivals Amazon and Apple which both have serious financial backing
- As much as 87% of rights to Spotify’s music stream is controlled by only four music companies
- At least a couple million users enjoy an ad-free service without getting a premium subscription. This will hurt Spotify’s revenue.
- Founders of Spotify still assume control over the company
- Spotify has admitted to faulty financial reporting in the past despite claimed measure to resolve such issues
Spotify’s flotation is an unusual one since it will not be issuing new stocks. Rather, the shares being offered are currently possessed by private investors.
Of course, no price for those shares has been announced in advance to their entry into Wall Street and they will not be under any management from investment bankers. While this may be saving money on behalf of Spotify, it will also generate a fair amount of volatility when the shares go live and investors attempt to decide on a price.
How valuable is Spotify?
When the Swedish company made its debut on the Stock Exchange, analysts put its value in the ballpark of 20 to 25 billion dollars. But with no share prices being set in advance, taking an educated guess is considerably more difficult.
What’s more, Spotify has not been a particularly profitable enterprise since its beginning, incurring costs such as royalties for both artistes and record labels. It will be up to the investors to decide if the company will stay afloat or not.
The strong points of Spotify
Despite not being particularly profitable on the whole, Spotify has shown immense growth in revenue in recent years. It is still the most prominent player for streaming music online. Both the number of free subscribers and premium subscribers are set to increase significantly by the end of this year.
The not-so-strong points of Spotify
Spotify’s primary concern is competition from rivals Amazon and Apple, who both have vast financial reserves to back them if they attempt a challenge.
Both sell hardware such as the Echo and the iPhone, each already containing their own music-streaming service.
Another major concern is a rather small number of suppliers – only four music companies, in fact, that collectively own the rights to about 87% of all music streamed off Spotify.
So is it a good idea to go ahead and purchase some Spotify shares? Below is a list of reasons why you should and why you should not.
There is no doubt about it right now, investing in Spotify shares today would appear to be quite a gamble. Hopefully, the breakdown of the pros and cons here will help you as a prospecting investor to make an informed decision.