Spotify loses some of its initial heat as it drops from its opening price of $165.90

Spotify lost some of its initial heat in midday trading Tuesday after soaring as much as 28 percent from its reference price in the company’s stock market debut.

Shares opened at $165.90 but fell more than 3 percent to below $160 in the first hour of trading — still far higher than expected.

The music streaming service is trading on the New York Stock Exchange under the ticker symbol SPOT. Unlike a traditional IPO, Spotify conducted a direct listing, meaning no banks underwrote the offering and no price was set ahead of the debut.

The NYSE set a reference price of $132 on Monday night based on previous trades on private markets, but ultimately the publicly listed price was based on investor demand.

Specialist Peter Giacchi, center, declares Spotify's IPO open on the floor of the New York Stock Exchange, Tuesday, April 3, 2018.

Richard Drew | AP
Specialist Peter Giacchi, center, declares Spotify’s IPO open on the floor of the New York Stock Exchange, Tuesday, April 3, 2018.

“Spotify is not raising capital, and our shareholders and employees have been free to buy and sell our stock for years,” CEO Daniel Ek wrote in a blog post Monday. “So while [Tuesday] puts us on a bigger stage, it doesn’t change who we are, what we are about, or how we operate.”

The company reported nearly $5 billion in revenue for 2017, according to its initial prospectus, though it still posted an operating loss of $461.3 million for the year.

Spotify had 71 million paying subscribers and more than 159 million monthly active listeners as of December, positioning the service far ahead of its closest competitor, Apple Music, with just 36 million subscribers.

Goldman SachsMorgan Stanley and Allen & Co. advised Spotify on the offering.

—CNBC’s Michelle Castillo contributed to this report.

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