Spotify’s IPO filing shows strong revenue gains, but steep losses

The prospectus does not offer any indication as to what date the IPO will take place

Spotify has filed a prospectus with the US Securities and Exchange Commission (SEC) signaling its long-awaited initial public offering (IPO), with the music streaming service disclosing a growth rate of 45% last year, although 2017 losses exceeded $1bn.

The filing states that its total user base numbers 159 million total monthly users, with 71 million using its premium service while the remainder access its ad-supported offering, with Spotify defining this split as a “two-sided marketplace”.

This helped generate $4.6bn in revenue for 2017, but still equated to a loss of $1.4bn for the period (see chart).

“Our ad-supported service serves as a funnel, driving more than 60% of our total gross added premium subscribers since we began tracking this data in February 2014. With a 51% increase in revenue from our ad-supported service from 2015 to 2016 and a 41% increase in revenue from our ad-supported service from 2016 to 2017,” reads the SEC filing.

It further goes on to illustrate the importance of its advertising offering, which has included a programmatic offering from early 2016, to its overall offering. It continues: “We believe our ad-supported service is a strong and viable stand-alone product with considerable long-term opportunity for growth in ad-supported users and revenue. However, we face intense competition in growing both our ad-supported users and premium subscribers, as well as in keeping our users highly engaged. If user engagement declines or if we fail to continue to grow our ad-supported user base or premium subscriber base, our revenue growth will be negatively impacted.”

Spotify will list on the New York Stock Exchange, but the prospectus does not offer any indication as to the exact date of when the IPO will take place.

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