Spotify — a top player in online music streaming, is about to close a round of financing that will set its value around $3 billion.
According to the Wall Street Journal, Spotify wants to raise more than $100 million in its latest deal. The $3 billion valuation at that mark would be a nice step up from last year’s financing, during which Spotify was valued at $1 billion — though it looks like it’s short of Spotify’s goal of being valued at more than $ billion. In light of the plunges in IPOs like Facebook (NASDAQ:FB), Zynga (NASDAQ:ZNGA) and Groupon (NASDAQ:GRPN), however, the enthusiasm for hot social deals is waning.
Spotify, founded in 2006, might generate as much as $900 million in revenues for this year. The company charges $10 per month for its service and has more than 15 million subscribers.
It’s unclear how much Spotify has to pay music labels for its content, but considering deals at other streaming services, the amount’s likely substantial, which means the company’s margins probably are tight.
Spotify also has a few entrenched competitors, including Pandora (NYSE:P), iHeartRatio and Rdio. And really throwing a wrench into things might be Apple (NASDAQ:AAPL), which is planning to launch its own streaming music service.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook.“ Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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