Call it what you will (IPO, DPO, simple listing) but Spotify (NYSE: SPOT) will begin trading in the public markets on April 3rd. The shares have a trading and price history that the company includes in their prospectus – they place a high emphasis on “transparency” in their corporate culture.

Spotify is a company we’ll be following since they are at the heart of how technology is changing in the music and entertainment business. They are also the gorilla in this segment amidst very large technology companies – they have 157M monthly active users, $5B in revenue, $1.8B in cash and are cash flow positive.

There is no “price” on this deal. In order to get one, we used the transaction history summary from June 2017 through February 2018 with a weighting by volume (VWAP). Using 9 months of data the VWAP is $95.39. However, the average price for the first three months of 2018 was $109.58. If we average these two we come to a $102 price level that we’ll use as the “offer price” for our IV model. (Note that the transaction history doesn’t include volume at specific prices so this is the best anyone can do with the information provided.)

At $102 and 177M shares outstanding that puts the market capitalization at $18B. Our IV below suggests the shares should trade at $170. But there are some big caveats around this number. Nobody knows what the long-term operating model will look like. Every 1% difference in the long-term margin drives about 25 points on the stock.

Some banks have initiated coverage of SPOT in advance of the listing. Both RBC and MKM came put with “Buy” ratings and price targets of $220 and $200 respectively.

Distilling the SPOT Investment Case

There’s a plethora of filings, presentations, and commentary out there on Spotify. Plus investors have seen at least a somewhat similar deal when Pandora (P) came public in 2011. They came out at $16 and one research firm, BTIG, boldly predicted they would trade down to $5.50 and they hit that nail on the head. That same analyst, Richard Greenfield, wrote in March of last year “The intersection of 50 million subscribers, consumer love, great underlying technology supported by an engineering culture and a daily use app on mobile, makes Spotify one of the most compelling acquisition targets in media today.”