An Extraordinary General Meeting held yesterday by Utopia Music has seen investors take greater oversight of the company – including appointment of a new Chair, which sees co-founder Mattias Hjelmstedt stepping down as Chair but keeping his seat on the board – in what one source told CMU was a “well-orchestrated coup”.
Sources close to Utopia, the beleaguered Swiss music tech company, have told CMU that existing investors in the company have agreed to put a further €15 million into the business, but want more oversight and more control, including additional board seats.
The most significant board appointment demanded by investors was that of a new interim Chair, Australian John Mitchell, CEO of Mitchell Asset Management and previously a Senior Vice President at Merrill Lynch.
Alongside Mitchell, Utopia’s long-time “Chief Relationship Officer” Greger Hagelin - founder of clothing brand WeSC - will also take a seat on the board.
This marks a significant development in the oversight of the company, with co-founder Mattias Hjelmstedt stepping back from his role as Chair.
Earlier in 2023 Hjelmstedt took on the day-to-day leadership of the company after CEO Markku Mäkeläinen stepped down. Then in October Hjelmstedt stepped back from that day-to-day leadership role with the appointment of Alain Couttolenc as the company’s new CEO. Couttolenc had previously worked at IPSOS as Chief Development Office, and before that was CEO Europe for Nielsen Media.
CMU now understands that Couttolenc has additionally – and unconnected to the EGM – brought in ex-Nielsen exec Fredrik Hedlund, who has held various SVP and CFO positions across the Nielsen portfolio and has specialisms in corporate finance, strategic investment and investor relations. However, according to sources, this appointment has not yet been formally announced as it is still subject to approval by the new board.
CMU has also been told that another senior Swiss finance executive "heavyweight" – believed to be a former UBS executive with a long track record in corporate turn-around – will be joining the company in a more direct, hands-on executive role.
Whether these new developments will mark a turning point following a tumultuous year for the company as it goes into 2024 remains to be seen.
After a spree of acquisitions in 2022 Utopia has faced a string of problems this year, including a series of divestments and lawsuits as well as a significant reduction in headcount across the business. This included the sudden liquidation of Utopia’s UK and Finnish R&D divisions, a move that left many former employees deeply unhappy about the way the company had acted in relation to the termination of their employment.
Positioned by the company as a reaction to the global macro-economic climate - including significant increases in the cost of capital - 2023 saw a marked decline in the fortunes of a business that was rumoured at one point to be trying to raise €300 million on a €2.5 billion valuation.
With spiralling costs and a range of acquisitions and products that did not naturally fit together, the company was forced to make radical cuts to bring spending under control, and find a coherent strategy to bring the company to break-even, and onward profitability.
Whether Utopia can reach break-even in 2024 is still open for debate, and although the company has made significant reductions in costs CMU understands that operational expenditure is still in the region of €3 million a month. Sources close to the company say that plans shown to investors show that while the company does not expect to reach break even in 2024 it should happen relatively soon after, which suggests any plans endorsed by the investors must be conditional on further financing.
Part of the new deal with investors, say sources, is a “tidying up” of the company’s balance sheet, where various convertible debt instruments were causing a “drag” on Utopia’s ability to raise additional money. With this housekeeping move apparently approved by the board and investors at yesterday’s EGM, the company is better positioned to raise money.
CMU is told that a syndicate of existing Utopia investors is now prepared to make a fresh injection of €15 million into the business, and that the company is close to closing negotiations to bring in a similar sum from new investors.
According to sources close to the deal, the fact that existing shareholders have agreed to put more money into the business is seen as a renewed vote in confidence for the slimmed-down company, and a reflection of investor confidence in the new leadership team.
With two open lawsuits – one relating to the botched acquisition of SourceAudio, and another which relates to the final $1.5 million tranche payment due for the acquisition of Lyric Financial, which Utopia acquired in a deal worth $8 million – Utopia is still some way off having the ‘clean slate’ that many feel it needs in order to be able to build a new business.
And while the fresh funding from existing investors goes some way to securing the future of the business, CMU is told that the company’s strategy for 2024 is to reach break-even and onward profitability through top-line growth, rather than further cost-cutting measures. On this basis, while €15 million, and potential further investment of another €15 million, delivers the company around ten months of runway at current OpEx, growing a business like Utopia is likely to require significant onward investment.
Speaking to CMU this morning about the outcome of the EGM, CEO Alain Couttolenc said: “We’re grateful for the ongoing support of our shareholders who believe in Utopia and what we want to achieve. We now have a pivotal piece in place to provide the company with a solid foundation that we can build upon to realise our commercial roadmap. We have great products in place, now it’s all about bring them to clients”.