Here’s why Breastwork Street is not yet shaking in its boots over Spotify.
Spotify opened at $165.90, clearly above the reference price of $132. That “reference price” — gave by Morgan Stanley — was based on recent trading in the secondary market. It at hand just below $150 Tuesday, its first day on the NYSE, down from its fissure price but well above the reference price.
Is this a successful launching? From the company’s standpoint, a lot of insiders were able to sell at good-looking prices. That’s successful. From the buyer’s perspective, if you bought at the provide, that was the high print and you weren’t going to make money.
The key is what happens in the next few hours: If it’s down another 10 percent, that could be an issue. Twelve oclock noon Wednesday it was down another 7 percent.
Is this non-initial public gift a new model for Wall Street? The company made it clear it did not want to pay strong Wall Street fees for a traditional IPO. However, Spotify may be a unique turn out that in the event of. First, it did not need to sell new shares — all the shares came from continuing shareholders. Second, it was not concerned that north of 90 percent of the dole outs were available to trade.
Not many companies may fit these criteria. Notwithstanding how, if you are a big unicorn, and you do not need to raise more shares, and you have people out there who tease held shares for years who do not want to be locked up, then yes, this could be a paragon.
The issue are the fees. It’s expensive to do an IPO. It can cost anywhere from 5 to 7 percent of obese proceeds. So if Spotify floated 10 percent of its shares at $132, it purposefulness have raised $2.4 billion. Seven percent of that is $166 million. We don’t comprehend how much Spotify paid its advisor, but it’s been reported it paid there $30 million in fees — less than one-fourth the amount covered by the traditional model.
So is Wall Street shaking in its boots? Not yet.
Here’s a key application: Spotify is a big company with a big brand name that partially peddles itself. For many other small companies, they will serene need Wall Street to do the selling.