Deezer stock listing: Why did the Spotify rival crash on its first day of trading?

Back in April, when French music streamer Deezer announced it would go public via a special purpose acquisition company (SPAC), there were high hopes for its offering. At the time, Deezer was widely valued at around €1.1 billion (about $1.12 billion), making it a rare French unicorn. But after yesterday’s debut on the French markets, the company’s stock crashed, giving the streamer a valuation of around €677 million (about $690 million). So, what happened?

Deezer was one of the first music streamers. As a matter of fact, it debuted in 2007–just one year after Spotify came onto the scene and changed the music industry forever. But while Deezer was Spotify’s main rival for a long time, in recent years other, much larger, U.S. companies entered the streaming market, including Apple and Amazon.

And it’s that competitive music streaming sector that has made investors wary of Deezer, reports Reuters. Many analysts and industry insiders doubt whether Deezer can realistically compete in 2022 and beyond with the larger players like Apple and Amazon, who have massive revenue streams outside of their music streaming businesses to tap into to keep their services competitive. Deezer, on the other hand, is a one-trick pony. Its only business is its streaming service, meaning if it wants to grow it’s got to take users away from the big three–Amazon, Apple, and Spotify.

Another strike against Deezer is that it’s operating in an industry that investors have cooled on in recent years. When Spotify went public in 2018, tech stocks were king–and continued to be so during the early years of the pandemic. But as 2022 has dragged on and inflation has risen and fears of looming recessions have grown, tech stocks have taken a beating. If you’re a relatively small player like Deezer, 2022 is a much more hostile environment to operate in than in past years.

At the time of this writing, Deezer stock is sitting right around €6.07 (about $6.19) per share, according to Euronext. That’s down from opening at €8.50 (about $8.67) yesterday.