Spotify shares drop 8.5% in their second day of trading

The music streaming company's shares fell by as much as 8.5% on their second day of trading, opening at $140 apiece and below Tuesday’s closing level.

After hitting an intra-day low of $134, which was just above the reference price set on Monday before their debut on the floor, they were rebounding, paring their initial drop to trade -1.41% lower at $139.

Spotify’s drop was a prime example of the general selloff gripping Wall Street, market analyst Neil Wilson said: "The Dow traded more than 400 points lower on the open but was down 600 points at one stage on the futures earlier in the day. At last look it was down around 210 points as calmer heads prevailed, while the S&P 500 was down less than 15 points.

“The market seems to be taking on a split personality; down heavily one day only to rally firmly the next as investors seem intent on overreacting to bad news and good news in equal measure. The volatility means the VIX is back up above 23 but still some way off the levels seen in February”, he said.

Nonetheless, in the run-up to its stockmarket debut analysts were already warning warned that - regardless of what was happening in the rest of the market - trading in Spotify shares was likely to be volatile due to the low liquidity resulting from the company's chosen method of floating - a direct listing.

In a research note sent to clients prior to the company's listing, Laith Khalaf, Senior Analyst at Hargreaves Lansdown, had said: "Spotify has chosen to simply dive straight into the New York Stock Exchange, rather than being lowered in gently by the usual consortium of investment banks. This approach will save the company money, but will probably lead to volatility when the stock starts trading, as the market tries to find a price it’s comfortable with."

Also, eMarketer analyst Paul Verna said that although it may be unfair on a company that has just entered the market, the tech sector is facing problems after Facebook’s data theft scandal.

"Spotify's going to have to get used to market volatility and getting dragged down (or pushed up) by other companies in their general space."