The Spotify AB initial public offering is quickly approaching.
It will probably be the biggest technology IPO of the year – and it's definitely the most watched one right now.
That's true for two reasons.
- Spotify is the leader in online music streaming, boasting some 140 million monthly active users – 70 million of them paying subscribers. That's well over double the 30 million paying members it boasted just two years ago. Plus, it's got a name brand that's just about tops among tech startups and a pre-IPO valuation of more than $19 billion.
- It's pursuing an unconventional IPO. While it's listing on the New York Stock Exchange, instead of using underwriters (i.e., big banks) to help sell the stock, set a price, and find interested buyers, Spotify is using a "direct listing" for its IPO. That means that every investor will be able to buy the stock at the same price on the day it opens. This gives retail investors the same opportunity as the hedge funds and other Wall Street sharks.
However, despite its popularity and success at obtaining and keeping paying subscribers, Spotify is still losing money and holds a significant amount of debt.
Plus, a company's stock price after an IPO nearly always has volatile price swings – the kind that'll make even veteran investors pull out their hair.
So here's the thing: I don't want you to put any of your money into the Spotify IPO.
I want you to listen to this "secret" instead…
The "Secret Passageway" to Wealth
Don't get me wrong. As a longtime advisor to Silicon Valley startups, I'm a big believer in the value of IPOs.
The chance to take exciting new tech firms public and make founders and early investors rich remains a driving force behind Silicon Valley's huge success.
Plus, new stocks are important for the overall market's health. For a generational bull market like this one to keep running, it needs to have a steady supply of fresh cash – and nothing brings in as much money as hot new IPOs.
But there's a problem – and it's a big one. Most learning investors fare poorly in the early days of trading a new stock – even a "direct listed" one like Spotify. This is when the shares are most volatile and subject to profit-taking after employees, venture capital firms, and others bound by lock-up periods can sell their shares for big profits.
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As much as I respect Spotify, I can't help but recall the Snap Inc. (Nasdaq: SNAP) IPO. Snap, the owner of the popular Snapchat picture-messaging service, last year had an IPO that Wall Street promised would be an easy home run.
Instead, the stock is down about 55% down from its first day of trading on March 2, 2017.
Now you can understand why I tell learning investors who want to cash in on the IPO market to take a good look at this instead.
Consider it a "secret passageway" to the tech sector's biggest profit machine…
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.