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Spotify to raise millions to boost future growth

Swedish music streaming giant Spotify is close to raising $500m in investor notes in order to underpin projected future growth, the Svenska Dagbladet newspaper reported on Wednesday.

Spotify to raise millions to boost future growth
Spotify founder Daniel Ek has never formally indicated an IPO is in the offing. Photo: Spotify
According to the paper, potential investors in the fundraising will be invited to a meeting in Stockholm “next week.”
   
The paper added that Spotify “will pay four percent yield” but that there would be an advantage to investors beyond that in the shape of discounts on Spotify shares in the event of a future initial public offering.
   
Spotify did not immediately comment but Svenska Dagbladet said those taking the notes would receive a “spectacular” 17.5 percent discount on the IPO share price should a listing arise within a year.
   
The discount rate would thereafter increase by 2.5 percent every six months, the paper said, showing photo grabs of discussion papers to that effect.
   
Spotify spokespersons were not immediately available for comment.
   
The group, up against strong competition notably from Apple, which launched a streaming service last June, was valued at $8.2 billion after Finnish-Swedish telecoms firm TeliaSonera bought a 1.2 percent stake last year.
   
Speculation about an IPO has been around for some time, though Spotify's Swedish founders,  who own the service though a Luxembourg holding company, have not indicated one is in the offing.
 
Spotify, founded in 2008, boasts more than 75 million active users worldwide, with more than 20 million paying subscribers, in some 60 countries.
   
It has yet to produce annual profits but in 2014 boasted sales of more than a billion euros ($1.1 billion) and is by far the largest company in the growing industry of streaming, which allows subscribers access to unlimited
amounts of music on demand.
   
The sector has grown rapidly as sales of CDs has declined. Revenue from streaming has overtaken that from downloads in 37 countries around the world, according to the IFPI recording industry body
   
Last month, the Beatles back catalogue was made available on a total of nine streaming services, including Spotify, Apple Music and Tidal for the first time.

SPORT

Is football next for Spotify’s billionaire CEO? 

The owner of Spotify, Daniel Ek, has offered to buy Premier League club Arsenal amid supporter backlash against their unpopular American owner, Stan Kroenke.

Arsenal play to an empty stadium
Spotify's owner has set his sights on Arsenal. Photo: Adrian Dennis/AFP

Spotify’s billionaire CEO, Daniel Ek, who revolutionised on-demand music listening for millions of people now hopes to bring his business acumen to “the beautiful game”.

The 38-year-old, known for his no-nonsense attitude, has offered to buy Premier League club Arsenal amid supporter backlash against unpopular American owner Stan Kroenke.

Ek co-founded Spotify with Martin Lorentzon in 2006, and the company which made its debut on the New York Stock Exchange in 2018 now has a market capitalisation of $56 billion.

The Swedish billionaire 

Bald, bearded and usually seen in sneakers, T-shirt and a blazer, Ek is known for his reserved style and pragmatism. He’s a shy problem-solver with a creative streak who takes long walks to think things through and prizes collective teamwork over the individual.

Ek got into computer programming as a young child, and was a dollar millionaire by the age of 23 when he sold his online advertising company, Advertigo, in 2006 for a reported $1.25 million.

“But he’s more of a businessman than a tech nerd,” Sven Carlsson, co-author of “The Spotify Play”, told AFP, painting him as a visionary.

“He’s always thinking six months ahead. He’s not into the details. He’s known for having ambitious, lofty goals, with no understanding for how unrealistic they are,” he said.

“He thinks big, and he has patience” to see those projects through to fruition.

Ek was raised in Stockholm’s working-class suburb of Rågsved. His father left the family when Daniel was young.

“He’s always had something to prove… Being left by his dad was a formative experience,” Carlsson said.

Pelle Snickars, co-author of “The Swedish Unicorn: the Story About Spotify”, describes Ek as “quite Swedish in terms of values”.

“We don’t see him on magazine covers alongside celebrities, he’s not hierarchical and does not hesitate to showcase his collaborators,” Snickars told AFP.

With around 9 percent of Spotify’s capital and 37 percent of voting rights, Forbes put Ek’s fortune at an estimated $4.8 billion in April 2021.

“Innovations are never entirely new”

In 2006, Ek and Lorentzon came up with the idea of creating a platform to distribute music online legally, a practice that was dominated by illegal file sharing sites at the time.

The duo experimented with sharing MP3 music files between the hard drives on their computers. In October 2008 Spotify was finally ready to go live after Ek pleaded with music labels to open their catalogues.

“Innovations are never entirely new,” Ek told the Royal Institute of Technology (KTH) in Stockholm during a 2013 visit.

“The success comes from combining things that already exist and trying to solve a problem that one is really involved in,” he added.

Ek reportedly dropped out of the university’s engineering programme to pursue an IT career – though his enrolment at the school has never been proven, Carlsson noted.

He said Ek’s former colleagues nicknamed him “Spice.”

“They thought he always spiced up his stories a little to make them more interesting,” Carlsson said, adding that it wasn’t necessarily a bad thing.

“Storytelling is something Spotify and Daniel Ek have always been good at.”

Football next? 

Ek’s perseverance may have led to the remarkable rise of the start-up, but artists have over the years complained of it paying them too little and cannibalising sales from their albums.

Ek has repeatedly argued that streaming is a better alternative for artists and that “piracy doesn’t pay (them) a penny – nothing, zilch, zero.”

Snickars and co-author Rasmus Fleischer dispute the idea that Spotify was founded to end piracy and force consumers to pay for music.

They claim that neither Ek nor Lorentzon “had any experience with working professionally with music”, but they had a common background from digital advertising.

“They weren’t particularly interested in music…they could have worked on skin products instead,” Snickars told AFP.

Now, Ek is ready to dive into the football arena.

“As a kid growing up, I’ve cheered for Arsenal as long as I can remember. If KSE [Kroenke Sports Enterprises] would like to sell Arsenal I’d be happy to throw my hat in the ring,” Ek wrote on Twitter on April 23.

Kroenke has however insisted Arsenal is not for sale, despite growing supporter unrest at the American billionaire’s ownership of the club, whose last Premier League title came in 2003/04.

Article by AFP’s Pia Ohlin.

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