What’s Going On Here?

Spotify wrapped up last year with disappointing fourth-quarter earnings, something unbelievable for the streaming giant.

What Does This Mean?

• Spotify added 11 million paying customers in Q4/2019, beating investors’ expectations and bringing the total number of subscribers to 124 million – more than double its closest rival.
• But it’s been spending big on podcast startups – including Gimlet Media, Anchor, and Parcast – in an effort to set itself apart, which might be one reason its losses grew by 70% in 2019.
• Spotify warned investors: it will be doubling down on podcast spending in 2020.

Why Should I Care?

For markets: At a loss for words.

• Spotify’s stock price fell 5%. But misery loves company:
  • Snapchat-owner Snap Inc. reported lower-than-expected 4Q sales despite adding more users than forecast, and its shares dropped over 10%.

Perhaps investors should take this as a learning moment: both companies were loss-making when they first listed their shares on the stock exchange, but that didn’t put anyone off.

The bigger picture: No mo’ banks.

• When Spotify went public in April 2018, it kicked off a new trend among tech companies of listing directly on a stock exchange.

In a direct listing, the company simply lists existing shares without selling new ones. That means it avoids paying IB – though it also misses out on the sale of new shares.

• Workplace messaging service Slack listed directly not long after Spotify, and it’s rumored Airbnb, GitLab, and Asana might do the same this year.

Content source: Finimize (2020) Spotify Scrapped. Available from: https://www.finimize.com/wp/news/spotify-scrapped/ [Accessed 6 February, 2020]