Facebook’s IPO Could Have Just Killed Some Digital Music IPOs

From Billboard:

Facebook’s problematic IPO has not only resulted in investor lawsuits and questions about the Nasdaq, it could have killed or postponed the IPO aspirations of Vevo and Spotify. Both companies have IPO aspirations, according to reports. And it makes sense one or the other would eventually consider going to the public markets.

But the timing might not be right. A source told the New York Post that Vevo should hold off on IPO aspirations in the wake of Facebook’s IPO, and the same came be inferred about a Spotify IPO, too. The article follows up an earlier Post report that Vevo had hired investment bank Allen & Co to help it seek new funding.

“A jump into the shark-infested IPO waters right now would destroy all the momentum [Vevo] has created for itself,” a knowledgeable insider told the Post. “[Vevo] has gone from a virtual unknown to a heavyweight player as music videos are, for some reason, in demand like it’s the ’80s. They only need to look at the disaster going on right before their eyes at Facebook. An IPO just doesn’t make sense right now — or in the near future.”

That’s a fair conclusion, although the problems with Facebook’s IPO stem from factors that would not arise with a Vevo or Spotify IPO: Nasdaq’s poor handling of the IPO, the possibility that Facebook shared material information only with its underwriters and the possibility the IPO’s underwriters shared analysts’ downgrade only with select investors before the IPO. Facebook itself is facing lawsuits that allege its SEC filings contain untrue statements or omitted material facts. These are issues that arose from a level of demand very few IPOs could ever hope to attain.

Vevo and Spotify are likely to be hurt by their associations with Facebook. Investors think they’re getting either a social media company or a company with a high degree of correlation to social media companies. But in reality investors get a company that pays for its content, something neither Facebook nor LinkedIn do for the content viewed and shared on their platforms, and has only loose social media ties. Vevo might boast of its integration with Facebook’s Open Graph. It could point to some impressive growth numbers after its Facebook-heavy redesign launched in early March. But integration with a social media service doesn’t mean your fate is tied to that of a social media company.

Continue reading the rest of the story on Billboard