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Music-streaming service Deezer delays IPO, citing ‘Market Conditions’ Deezer CEO Hans-Holger Albrecht, in late September, said, ‘For now it is about accelerating our growth with the IPO.’ PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES Music-streaming service Deezer late Tuesday postponed its initial public offeri…

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Deezer CEO Hans-Holger Albrecht, in late September, said, ‘For now it is about accelerating our growth with the IPO.’ PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES

Music-streaming service Deezer late Tuesday postponed its initial public offering planned for later this week, a setback for the firm that had just weeks ago said it planned to use funds from the share sale to attract new users.

The Paris-based company cited only “market conditions” in announcing the suspension of its IPO, despite a senior executive having only weeks earlier cited “big demand in the market” as one of the reasons the money-losing firm had decided to go public.

Deezer said that it would “review its fundraising options in the future” but didn’t give a time frame. The firm added that it is “well funded and well positioned as it continues to pursue its growth strategy.”

Didier Bench, the chairman of Deezer’s board, said the company changed course after watching investors flee last week from Internet radio giant Pandora Media Inc. Pandora shares plummeted 36% after the company said in its third-quarter earnings report that it had lost 1.3 million active listeners from the second quarter, likely because Apple Inc.launched its new streaming service Apple Music and was offering free trials.

Pandora also announced it had agreed to a $90 million settlement with record labels over its unpaid use of music recorded before 1972, which isn’t protected by U.S. copyright law. The settlement, amounting to about 10% of Pandora’s annual revenue, also spooked investors already concerned about the high costs that streaming companies must pay to license music.

Mr. Bench added that the market’s reaction to Netflix’s disappointing third-quarter earnings factored into its decision as well, as the on-demand subscription video service has a similar business model to Deezer’s. Netflix shares fell more than 10% after its earnings report earlier this month, though they’ve since rebounded slightly.

“It’s better for us to wait a bit,” said Mr. Bench, adding that he wasn’t sure when the company might try again. “We have money and we continue to grow.”

But the postponement is a blow to a company that faces stiff competition from bigger and richer rivals, including Sweden’s Spotify and Apple Music.

It also raises questions about the long-term prospects for the streaming music business. Both Spotify and Deezer say they lose money but could become profitable if they stopped spending to attract new users.

Deezer’s revenue grew 41% in the first half of 2015 to €93 million ($102.7 million), but it remained in the red, losing €9 million in the period.

Deezer had said earlier this month that it aimed to sell a roughly 30% stake in the company on the Paris Stock Exchange at a value of €300 million, at the low end of the price range. After the injection of new capital, that would imply a valuation of €900 million to €1.1 billion, the company had said.

The firm had said it planned to use the funds to acquire customers through marketing.

But there were signs that Deezer’s business faced challenges. In its financial filings ahead of the IPO, the company said the majority of its revenue-generating subscribers were “inactive,” meaning that their subscriptions came as part of a bundle with a telecommunications operator.

The firm said that it was shifting its model toward more direct subscribers, but that it appears it could take a toll on its overall subscriber numbers. Deezer’s number of revenue-generating subscribers at the end of June was down about 2% from the end of December, according to the filing.

The company blamed the decline on changing contracts with telecom operators, particularly in France, its biggest market, where its partnership with Orange SA now focuses on stand-alone subscriptions rather than bundles, the company said at the time.

Deezer executives had said the shift wasn’t a problem and that investor appetite for the growing streaming-music business was high.

“For now it is about accelerating our growth with the IPO,” Chief Executive Hans-Holger Albrecht said in late September.

 

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