Stocks wavered in early trading Tuesday but picked up steam in the late afternoon, reversing some of yesterday's losses. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^SPX) both added more than a percentage point.
Today's stock market
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Spotify goes public
Swedish music-streaming specialist Spotify made its debut as a public company using an unusual process to put itself up for sale, and investors snapped up the shares, which closed 12.9% above the $132 "reference price" set the night before by the New York Stock Exchange. Spotify was the fifth-most-actively traded issue on the NYSE for the day at 28.5 million shares.
Rather than using an underwriter to launch a typical initial public offering (IPO), Spotify used a rare maneuver called "direct listing" to put the company's shares up for public trading. The company didn't offer newly issued stock, and therefore did not have an offering price, and didn't raise new capital. Spotify also didn't put existing shareholders, other than Chinese tech company Tencent Holdings, under contractual agreements for lock-up periods, meaning that company insiders and previous investors were free to sell their shares immediately.
The unusual approach meant there was uncertainty and potential for high volatility while the market discovered the price, but trading was relatively orderly, with the stock opening at $165.90 and gradually declining during the day to close at $149.01, valuing the company at $26.5 billion.
Spotify reports it had 71 million paying premium subscribers at the end of 2017, up 46% from the year before. Total monthly active users were up 28% to 157 million. The company brought in 4.09 billion euros in revenue in 2017, which was an increase of 39% from the year before. Spotify has yet to turn a profit, losing 1.235 billion euros last year. The company projects strong but decelerating growth and shrinking losses in 2018.
Tesla ramps up Model 3 production
Tesla released first-quarter production totals, and despite missing its goal to be producing 2,500 Model 3 vehicles per week, the numbers were good enough for investors, sending the stock up 6%.
Total Q1 production was 34,494 vehicles, a 40% increase from last quarter. Of that total, 24,728 were Model S and Model X vehicles, and 9,766 were Model 3 units. Model 3 production in the last seven days was 2,020 cars, and the company expects to produce 2,000 in the next week.
Even though Model 3 production at the end of the quarter is 20% below the goal the company set for itself, Tesla didn't back off much from its goal for 5,000 produced weekly by the end of the second quarter, although it left itself some wiggle room. It expects to hit that target rate "in about three months."
The market reaction was likely a sigh of relief after a spate of bad news, including a Model X crashing while on Autopilot and a lowering of the company's credit rating, which has driven the stock price down 17% in the last week. But perhaps also figuring in were some reassuring words about the company's capital needs. Due to higher volumes, strong gross margin, and positive operating cash flow, Tesla "does not require an equity or debt raise this year, apart from standard credit lines," according to the press release.