Thursday 18 October 2018

Davy clients tune into profit after Spotify listing


Daniel Ek, chief executive officer and co-founder of music-streaming service Spotify, which began trading on the NYSE last week
Daniel Ek, chief executive officer and co-founder of music-streaming service Spotify, which began trading on the NYSE last week
Samantha McCaughren

Samantha McCaughren

Around 100 Davy clients will be celebrating a near threefold increase in their investments in Spotify in less than two-and-a-half years following the listing of music streaming company last week.

Davy clients have been investors in the tech space though the Tiger Funds and Silverlake - getting returns of up to seven times in a relatively short number of years in companies including Facebook, zynga, LinkedIn and Skype.

Tiger is reportedly the fourth-largest shareholder in Spotify with a 7.2pc stake valued at $1.9bn, with its prior stake valued at $700m. Tiger is believed to have first bought in back in 2015, but may have bumped up its stake more recently.

Market sources said that Davy clients will be among those to benefit from the listing on the New York Stock Exchange (NYSE).

In 2012, Davy clients were believed to have enjoyed a significant return on Facebook.

Market sources said at the time that Davy clients paid around $10m for their stake in 2009 via Tiger Global but the value rose to $60m by 2012 when the company listed.

Spotify took the unusual route of a direct listing, which was seen as a test case for other companies tempted to list without selling new shares, and for bankers that could lose out on millions of dollars in underwriting fees for future initial public offerings.

After the listing, Spotify has an enterprise value - which takes into account cash and debt on the company's balance sheet - of about five times its 2017 revenue of $5bn.

Analysts had worried ahead of Spotify's direct listing that forgoing underwriters and traditional promotional events designed to stimulate interest from institutional investors could mean volatility once formal trading kicked off.

The NYSE set Spotify's reference price late on Monday to be in line with informal, private trading of Spotify shares, giving an early estimate of the level at which supply and demand could be balanced.

The opening public price was determined by buy and sell orders collected by the NYSE from broker-dealers and a designated market maker's determination of where buy orders could be matched with sell orders. Some 91pc of Spotify's 178 million shares were tradeable.

Additional reporting Bloomberg

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