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Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Why Spotify Will Likely Surge During Its IPO

Companies / IPOs Mar 22, 2018 - 07:01 AM GMT

By: Boris_Dzhingarov

Companies IPO’s are nothing new to the market. At the end of the day, companies go public all the time. Some of them fly out of the gates, some of them fall dramatically, and others stay relatively flat. However, when it comes to spotify in particular, this thing is likely to soar.

Sure, the company is a strong company, and there’s definitely value here. However, that’s not the primary reason that the Spotify stock price is likely to rocket on the launch of the IPO. The big reason has to do with the unique aspects of the shares that will become available when the IPO goes public. Today, we’ll talk about what’s so unique about the shares that will be sold during the Spotify IPO, why this unique aspect will likely lead to a big spike in value right out of the gate, and what to watch for following the IPO launch.




What’s So Unique About The Spotify Shares That Are Being Sold In The IPO?

The Spotify IPO is like nothing else that we’ve seen before. Sure, like any other IPO, this one will turn Spotify into a publicly traded company. However, that’s about the only thing that’s the same. Lately, there has been quite a bit of discussion surrounding the unorthodox approach to marketing and celebration of the IPO. Essentially, there will be no celebrations or bell ringings, and marketing will not happen behind closed doors. However, what really makes the Spotify IPO unique is the shares that will be sold during the offering.

In general, when an IPO takes place, the privately traded company sells newly created shares in an effort to raise funds, becoming public in the process. However, when it comes to the Spotify IPO, there will be no new shares created. Instead, the only shares that will available during the IPO are shares that have already been issued and that are already owned by shareholders in the company. Personally, I’ve never seen an initial public offering transaction quite like this one, and after doing quite a bit of research, I don’t think that there has been a history of a transaction like this in the past.

Why This Is Likely To Lead To A Tremendous Spike In Value

At the end of the day, the unique way in which Spotify is going about its IPO will likely create a bit of a spike. The reason for this is relatively simple. During a traditional IPO, newly created shares are made available. This means that the supply of shares is generally large enough to cover the demand for those shares. However, this isn’t the case when it comes to the Spotify offering.

As mentioned above, the only shares that are going to be made available during the Spotify IPO will be shares that are already owned. Therefore, in order for a share to be available to purchase, a shareholder is going to have to want to sell. With the lack of supply on the market, demand is likely to naturally outpace the supply of shares, ultimately leading to a spike.

Think about it, demand for a Spotify IPO is going to be incredibly large as is. The company is right behind Pandora when it comes to streaming music market share and it has built its way to become a household name. This is naturally going to create demand. However, by creating the “you can’t have it” feeling due to limited supply, demand could grow even more. Not to mention the fact that the unorthodox way in which the company is going about its IPO is leading to more publicity than the average IPO sees. Putting this all together suggests that we’re going to see some pretty strong demand, leading to heavy spikes in value on the day of the IPO.

What To Watch Following The Launch

With the IPO just around the corner, we have exciting times ahead. To take advantage of the movement, make sure to keep a close eye on the shares available for purchase and the demand for the shares upon the IPO. Also, watch for wild swings as large shareholders offload and those looking to get involved pick up the shares that become available! Nonetheless, the Spotify IPO is likely to be one of the most exciting offerings we’ve seen in some time!

By Boris Dzhingarov

© 2018 Copyright Boris Dzhingarov - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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