Thursday, November 21, 2013

How Twitter's Stock Price Will Affect Spotify

There are a lot of music tech companies with eyes on their big score, commonly known as the IPO. Spotify is likely to be the next music tech company in line, but much depends on Twitter’s stock price over the upcoming months.

Twitter Stock Price image from Music 3.0 Blog
The influence of Twitter stock over music tech has been hotly debated recently, with Billboard’s Glenn Peoples stating that it will have little effect, while industry analyst Mark Mulligan claiming that the effect can be substantial. If you can’t already tell, I come down on Mulligan’s side, mostly because so much of the stock market is based on perception.

Have you even noticed that if a company’s quarterly profit doesn’t meet an analyst’s prediction, the stock price declines? This happens even if the company had what many might consider a good quarter where it was profitable and only missed the analyst’s prediction by a point or two. The reason for this? The perception that there must be something seriously wrong under the company’s hood if the arbitrary goals set by the analyst haven’t been met, regardless of how unreachable they might have been in the first place. Then there’s the case of how the stock price of a company can tank if a negative rumor gets out in the wild, even if it’s far from being true. That’s because stock prices are built more on perception than reality.

Of course that means that how Twitter does in the market will affect any tech or music tech company who’s IPO comes after it. Facebook already put a chill in the tech market when its stock didn’t perform as expected (there’s that perception thing again). Even though the stock has come back to trade above its IPO price of $38 (it’s trading around $46 today), the general feeling around it is negative and that had rubbed off on the Internet tech sector as a whole. Read more on Forbes.

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