Private trades in Spotify shares are valuing the music streaming company at about US$16 billion, according to people familiar with the deals, raising the prospect of a bumper flotation next year, Reuters reports.
That is around US$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 US$20 billion when it goes public.
A US$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 US$20 billion around listing.
Spotify is aiming to file its intention to float with US regulators toward 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 US$50 billion in a few years.
The investors and venture capitalists polled pointed to Spotify’s position as the “undisputed market leader” in music streaming, and to rapid growth in its paying users from five million in 2012 to over 60 million today.
While its net losses doubled last year to US$600 million, a more than 50 percent increase in revenues to US$3.4 billion has raised hopes it is on the right track to make money.
A bumper equity valuation would give Spotify a currency to help meet the challenge from rivals such as Apple Music and Amazon Music, and potentially fund an expansion into adjacent businesses, such as video, or geographies it has yet to reach.
A high market valuation would also bolster Spotify’s position in licensing negotiations with major music labels on which its business model depends.
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