Despite deep losses rising to $1.5 billion in 2017, Swedish music streaming company Spotify Technology Inc. filed for an initial public offering on Wednesday.
The company filed for a rare direct listing with the Securities and Exchange Commission under the ticker name SPOT.
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Spotify says its shares have reached highs of $132.50 on private markets, leading to a valuation of $23 billion based on ordinary shares outstanding as of Feb. 22.
While the company reports 71 million paying subscribers and more than 159 million monthly active listeners in 61 countries and territories in December, Spotify posted a loss of $1.5 billion in 2017 despite revenue of $4.99 billion. The company says $1 billion of the loss stemmed from a non-recurring expense due to convertible notes from a December transaction with Tencent, an internet company in China that owns a 7.5 percent stake.
The number of paid subscribers grew at a rate of 46 percent year-over-year while monthly active listeners rose by 29 percent.
Streaming services have faced hurdles generating a profit, in part because a large portion of their revenue goes toward paying for royalty rates to songwriters, publishers and music labels which also tend to fluctuate. Spotify says in 2017 the expenses for rights holders rose by 27 percent year-over-year, amassing a total of 8 billion euros ( $9.7 billion) in royalties payments since 2008.
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Pandora Media (ticker: P) has never generated a profit and derives part of its revenue from advertising than listeners paying subscriptions and has 74.7 million listeners at the end of the fourth quarter of 2017 while Apple Music ( AAPL) has 36 subscribers.
Spotify also says in its filings that the company “identified a material weakness in our internal control over financial reporting relating to inadequate financial statement preparation and review procedures” for the past three calendar years.” Pandora issued a similar warning when it went public in 2011.
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Spotify Files for IPO, Lost $1.5 Billion Last Year originally appeared on usnews.com
