Spotify is now valued at $16 billion ($US), according to sources close to recent private dealings. That valuation has jumped $3 billion since July 2017.
According to a report by Reuters, the Spotify team and stakeholders are looking for a $20 billion valuation ahead of a planned initial public offering (IPO) during the first two quarters of 2018.
This pre-IPO market “allows employees and founders to cash in on some of their paper wealth, while letting other investors get a head start on the listing. Early investors tired of waiting for a payout are selling shares too.”
Tech and business insiders anticipate a $50 billion valuation for Spotify in the next few years. “It’s hard to speculate on Spotify’s valuation since we only have historic results prior to the most recent renegotiation with the music majors,” said Louis Citroen, an analyst at Arete Research.
“But a $20 billion valuation sounds punchy as it implies both that Spotify can continue growing customers at a fast pace, and that it might achieve a double-digit margin. We can believe in the customer growth, but are less sure about profitability given high royalty costs and limited differentiation with rivals on content, price or technology”.
In 2016, Spotify’s net losses doubled to $600 million. However, a more than 50 percent increase in revenues to $3.4 billion has caused positive speculation that the platform it is on the right track to make money. A much brighter outlook than that of streaming competitor SoundCloud.
Read the complete analysis here.