$23bn Spotify debut lifts some of tech gloom

By Eamon Quinn

The $23bn (€18.6bn) debut trading day for Spotify, the music streaming service, helped lighten the gloom for embattled technology shares and gave European stock markets their first lift in over a week.

Global stock markets had last week been gripped by fears that the slide in technology shares, made worse by the data privacy breaches surrounding Facebook, could be just the start of a major sell-off.

Leading Irish analyst, David Holohan, chief investment officer at Merrion has warned that there are several warning signals that the top of the investment cycle is drawing close for technology.

He cited the flow of money into the US technology sector as being significant, running at the highest annualised rate since the early 2000s.

Yesterday, the reception for Spotify brought some relief to these fears.

“Investors have run through a selection of ‘reasons to be fearful’ over the past eight weeks, with the narrative changing as fast as the price: Inflation scare, tariff wars, Facebook hacking, tariff wars again, and now concerns over Amazon, have all been cited as the culprits,” said Chris Beauchamp, chief market analyst at online broker IG.

“Sentiment has moved back towards neutral, if not yet completely fearful, providing attractive risk-reward for those prepared to buy on weakness,” he said, noting Spotify starting its first day of trading “as a definite win”.

Spotify shares changed hands well above levels they had traded in private markets, as it launched a direct listing on the New York Stock Exchange.

Shares opened at $165.90, nearly 26% above the reference price of $132 a share set by the exchange. That would value the company at more than $23bn (€18.6bn) before ending at $149.01 up 12.89%.

Its unusual route to publicly trading its shares will likely be watched by other technology companies that could be tempted to list without selling new shares, and by bankers that could lose out on millions of dollars in future underwriting fees.

The strong early trading for Spotify came on the heels of a steep US equity selloff led by tech stocks, though the market had found firmer footing in late trading.

The NYSE set Spotify’s reference price late on Monday, giving an estimate of the level at which supply and demand could be balanced.

Since launching its streaming music service a decade ago, the Stockholm-founded company has overcome heavy resistance from big record labels and some major music artists to transform how the industry makes money. Spotify offers access to vast libraries of music rather than making users pay for CDs or downloads of individual albums or tracks. The company has structured the stock market listing to allow existing investors to sell directly to the public, while offering no new shares of its own.

Analysts had flagged concerns that forgoing hiring investment banks as underwriters or holding traditional promotional events with institutional investors could mean volatility in Spotify shares once formal trading kicked off.

The three major US stock indexes ended higher after a choppy session yesterday as investors looked forward to earnings season, while the S&P 500 pushed above a key support level and Amazon.com shares jumped on bets that criticism from President Donald Trump would not translate to policy changes. After a volatile session, Amazon proved the biggest boost for Nasdaq. The White House said it wasn’t taking action even as Trump continued his attacks on the online retailer, according to Bloomberg.

The Dow Jones Industrial Average rose 1.65%, to 24,033.36, the S&P 500 gained 1.26%, to 2,614.45, and the Nasdaq Composite was up 1.04%, to 6,941.28.

- Additional reporting Reuters