Spotify’s share price experienced a significant drop on Friday, resulting in the company’s worth decreasing to less than $24bn in the volatile streaming market. The primary sources of profits for the music streaming service include licensing music, streaming numbers, advertising, and subscriptions. This drop in share price marks the lowest point for the company since it floated on the New York Stock Exchange in April.
Tech Sector Uncertainty
On November 12th, Spotify closed the day’s trading with a share price of approximately $131.31, which is almost 5% lower than the previous week’s price. Since its trading debut, Spotify’s highest share price has been just under $200 per share, a figure more commonly associated with tech giants such as Apple and Google. Experts attribute this sudden drop in share value to changing trends within the tech market.
Many analysts believe that macroeconomic changes have had the most significant impact on tech-based services. The increasing diversification in the technology market has not only given customers a wider choice of streaming services but has also forced companies with larger market shares, such as Spotify, Snapchat, and YouTube, to adapt their services to retain customers.
These sudden market changes have also prevented many other tech-based companies from floating on the stock market. For instance, US-based firm Tecent Music recently delayed its stock market introduction due to an increasingly unstable market outlook.
Profitability Concerns
Spotify has reasons to be concerned following its third-quarter profits, which fell significantly short of shareholders’ expectations.