See SPOT List
With great fanfare, Spotify had a mediocre debut. And that is exactly what it wanted. The stock opened at $165.90 - fetching it an impressive $32 billion valuation - and finished the week at $147.92. While IPO buyers don't have much to celebrate, existing shareholders can now sell at a substantial premium to earlier private valuations. Spotify's stock price stabilized at $145-$150 on Thursday and Friday, but with 91% of its shares free of any lock-up, it is best to wait a few weeks until we can call the direct listing a success.
While Spotify's "reimagined IPO process" achieved its goals, don't expect a pickup in direct listings yet. In addition to not needing IPO capital, the world's largest music streaming service had a number of unique strengths, including a powerful brand, a global scale, rapid growth, positive free cash flow, and a dominant position in a large market with secular growth. Not many companies fit that description.
However, Spotify's smooth listing and high valuation represents good news for pre-IPO tech companies. Tencent Music, rumored to be targeting a $1 billion IPO in 2018, is the most obvious beneficiary. In quick succession, two "decacorns" were well-received by public markets (Dropbox, DBX, is up 45% from its March IPO). So unless the market's current volatility persists, look out for a surge of tech IPOs in the second quarter (Read more in our 1Q18 Review).
| 1 IPO During the Week of April 2nd, 2018 | ||||
|---|---|---|---|---|
| Issuer Business |
Market Cap at IPO |
Price vs. Midpoint |
First Day Return |
Return at 04/06 |
| Spotify (SPOT) | $25,099M* | 0% | +13%* | +12%* |
| World's largest music streaming subscription service. | ||||
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IPO Pipeline update
| 6 Filings During the Week of April 2nd, 2018 | |||
|---|---|---|---|
| Issuer Business |
Deal Size |
Sector | Lead Underwriter |
| Construction Partners (ROAD) | $207M | Materials | Baird |
| Provides infrastructure and road construction in the southeastern United States. | |||
| Inspire Medical Systems (INSP) | $86M | Health Care | BofA ML |
| Sells its proprietary Inspire therapy for sleep apnea. | |||
| Spirit of Texas Bank (STXB) | $46M | Financials | Stephens |
| Texas community bank with 15 full-service branches and $1 billion in assets. | |||
| Unity Biotechnology (UBX) | $85M | Health Care | Goldman |
| Preclinical biotech developing therapies for age-associated diseases. | |||
| Goosehead Insurance (GSHD) | $100M | Financials | JP Morgan |
| Operates and franchises personal lines insurance agencies in the US. | |||
| HeadHunter Group (HHR) | $250M | Industrials | Morgan Stanley |
| Online job recruitment platform in Russia. | |||
IPO Market Snapshot
The Renaissance IPO Indices are market cap weighted baskets of newly public companies. The Renaissance IPO Index has returned -0.6% year-to-date and the S&P 500 is down -2.6%. Renaissance Capital's IPO ETF (NYSE: IPO) tracks the index, and top ETF holdings include Snap (SNAP) and US Foods (USFD). The Renaissance International IPO Index is up 4.9% year-to-date, while the ACWX is down -1.3%. Renaissance Capital’s International IPO ETF (NYSE: IPOS) tracks the index, and top ETF holdings include Orsted (DONG Energy) and ASR Nederland.
