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More speculation over a Spotify IPO
By Chris Cooke | Published on Monday 10 March 2014
For those of you keeping a ‘reasons to speculate a Spotify IPO is incoming’ list on your office white board (you’ve all got yourself an office white board by now, yes?), add this: late last year the digital company reportedly secured a $200 million credit facility via banking organisations Morgan Stanley, Credit Suisse, Deutsche Bank and Goldman Sachs.
Rumours that Spotify was seeking debt financing first circulated last September, with sources saying that some key investors in the business were now nervous of further diluting their equity by raising further finance though the selling of shares. Though in November the Wall Street Journal revealed that another batch of shares in the streaming set up had nevertheless been sold raising another $250 million, and valuing the company somewhere north of $4 billion.
But, it seems, the separate $200 million debt-based credit facility was also negotiated by the end of 2013, and even though the Financial Times’ sources say that the company is yet to dip into the overdraft, the fact that such a facility was secured, and the fact that four big City banks were willing to provide it, all points to an initial public offering – or flotation if you prefer – now being very much on the agenda.
As previously reported, a recent job ad at the digital firm seeking an External Reporting Specialist to “prepare the company for international financial standards” also suggested IPO prep is now underway.
Meanwhile many see last week’s surprise acquisition by the streaming company of music data specialists The Echo Nest as being primarily motivated by IPO plans. Having the music industry’s market-leading data and discovery specialists in-house will look good in a Spotify IPO prospectus, especially if you buy the mantra that, in a crowded streaming music market, having the best ‘discovery tools’ is key to market dominance.
Also, it’s debatable that the acquisition is, in the long-term, for the good of The Echo Nest, in that being owned by Spotify will likely hinder its gathering of music usage data from a wide range of sources, and will limit its ability to sell B2B data services to other digital service providers. That The Echo Nest’s founders and investors nevertheless chose to sell in a deal where – according to TechCrunch – 90% of the $100 million asking price was paid in Spotify stock possibly suggests they are confident they’ll be able to cash in that equity in the near-future.
As much previously noted, the Spotify IPO will be a big pay-day for the music industry, with many labels having equity in the firm stemming from their original licensing deals. Though, once the share sale is complete, then the real challenge begins: making streaming music actually profitable.
