Into the storm

It’s unfortunate timing for one of the biggest tech market events of the year. Spotify comes to market today in the midst of a highly challenging and volatile environment for tech stocks.

The dual effects of rising concerns over whether Facebook and others have overstepped the mark in their ongoing use of our rich and valuable data, and campaigns from Trump and others to bring Amazon to heel cast a gloomy cloud over today’s launch.

Sentiment is critical too – as the valuation of Spotify relies as heavily on positive, far sighted sentiment as it does underlying economics. Estimates for starting valuation in the range $20bn-$25bn are at 3-4x revenue for a business that has never made a profit.

As the clear leader in the music streaming space, Spotify may well justify this valuation – but the path to generate underlying economics to support it is a long one.

Let’s hope that the chill wind that is currently blowing through the markets doesn’t cause investors to catch a cold.