SAN FRANCISCO — Spotify picked up more fans on Wall Street on Tuesday as investors gave the unprofitable company a warm welcome in its stock market debut.
After several hours of anticipation, Spotify's shares traded as high as $169, fell back to hover around $150, and closed at $149.01 — well above its previous high of $132.50 in deals worked out during Spotify's 12-year history as a privately held company.
The stock market's rousing reception left Spotify with a market value of about $28 billion, according to FactSet. By comparison, internet radio station Pandora Media's market value stands at $1.2 billion nearly seven years after that company went public.
The good vibes surrounding Spotify stem from its early lead in music streaming — a still-evolving field trying to hook people on the idea that it's better to subscribe for online access to millions of tunes than to buy individual albums and singles.
Spotify has struck a chord with 71 million worldwide subscribers so far and is aiming to increase that number to as many as 96 million subscribers by the end of the year.
By comparison, Apple's nearly 3-year-old music streaming service has 38 million subscribers. A list of other formidable competitors that includes Google and Amazon also offers similar music streaming services, raising the specter of Spotify's being wiped out by far richer rivals.
Spotify's early lead in music streaming has drawn comparisons to Netflix, which built upon its pioneering role in DVD-by-mail rentals and then video streaming to create a hugely successful, subscription-driven franchise that has produced spectacular investment returns and left the company with a market value of $122 billion.
A $10,000 investment in Netflix's 2002 initial public stock offering would now be worth more than $2.6 million, leaving some investors wondering if Spotify might be on a similar trajectory in music streaming.
Unlike Netflix, Spotify still isn't profitable, having lost more than $3 billion since it started more than a decade ago.
"One of the big questions about Spotify is whether they can take it to the next level like Netflix has," said Daniel Morgan, senior portfolio manager for Synovus Trust.