Why would Spotify need $1B? Is most of this money used to license content?
Spotify raises $1B in debt with devilish terms to fight Apple Music
31–40 of 232 posts
Re: Spotify raises $1B in debt with devilish terms to fight Apple Music
#32"TPG and Dragoneer can sell their shares just 90 days after the IPO, before the 180-day lockup period ends for Spotify’s employees and other investors." Among many the bad terms disclosed in the article, IMO this is probably the worst - basically, this right is a license to cash out and torpedo the company within 3 months (just the right amount of time to see how the market reacts to Spotify's first earnings call as…
Surprise surprise, employees lose out again. But I guess they were already in danger of getting nothing if this is the deal management struck.
Ya - sucks. I said this in a comment below, but also relevant here: capital > labor
Re: Spotify raises $1B in debt with devilish terms to fight Apple Music
#33This is significant. It shows a do or die attitude and a fact that many companies at this level are not self-aware enough to recognize; that their competition (Apple) will kill them, or, they will dominate this space. Will be interesting to see how this plays out.
What are the "many companies" under real threat by Apple? I think the set is fairly small?
I don't think OP was implying just Apple, anyone competing in a winner-take-all market has to have this attitude.
Re: Spotify raises $1B in debt with devilish terms to fight Apple Music
#34How can early employees defend themselves? What stock structures, if any, fight against this? Is there nothing possible common stock holders can do to protect themselves aside from pray the founders have some shred of morality?
Note that the founders interests are aligned with the early employees, they are all taking an equal haircut. Either (a) the founders are sacrificing themselves for the sake of the company which means they were already in dire straits or (b) they actually believe that this will be a net positive for the value of common shares, e.g. by avoiding a down round. Well, actually, (c) the founders have lost their controlling…
Founders haver probably already sold off equity worth tens/hundreds of millions of dollars during previous rounds. Taking some off the table..
Re: Spotify raises $1B in debt with devilish terms to fight Apple Music
#35Jesus Christ, that's not clickbait, those really are devilish terms. It's debt, they lose $200MM of shares at the time of IPO, and they very well could end up paying 15% interest yearly on this. And when the IPO happens, if it follows the general IPO trend and tanks at first, it's very possible TPG and Dragoneer will want to get out -- dumping 1.2 billion of Spotify onto the market and absolutely destroying the share…
Is there any kind of business case for this - besides what looks like blind panic?
Spotify raised $500m last year. Now it seems to think it needs to nearly double its existing > $1bn funding/debt pile so badly it's willing to settle for a loan-shark mugging.
I'd guess the money isn't needed for new customers - more to stay afloat long enough to have some hope of getting to IPO and allowing the investors to get some of their money back before the office burns down.
Spotify would literally need to double its subscriber base to make this debt viable, and that doesn't seem likely.
Re: Spotify raises $1B in debt with devilish terms to fight Apple Music
#36At this scale, debt is always bad option. There are not many company in the world which can repay more than 1billion$ with interest. The demand of debt at this level is so low, that either they should be doing it at pretty low interest rates or not at all.
It's debt but it's pretty clearly meant to convert into equity not be re-paid.
Re: Spotify raises $1B in debt with devilish terms to fight Apple Music
#37Jesus Christ, that's not clickbait, those really are devilish terms. It's debt, they lose $200MM of shares at the time of IPO, and they very well could end up paying 15% interest yearly on this. And when the IPO happens, if it follows the general IPO trend and tanks at first, it's very possible TPG and Dragoneer will want to get out -- dumping 1.2 billion of Spotify onto the market and absolutely destroying the share…
Is there any kind of business case for this - besides what looks like blind panic? Spotify raised $500m last year. Now it seems to think it needs to nearly double its existing > $1bn funding/debt pile so badly it's willing to settle for a loan-shark mugging. I'd guess the money isn't needed for new customers - more to stay afloat long enough to have some hope of getting to IPO and allowing the investors to get some o…
They clearly believe that they will die without this, and the wound taken allows them to survive.
Re: Spotify raises $1B in debt with devilish terms to fight Apple Music
#38This is significant. It shows a do or die attitude and a fact that many companies at this level are not self-aware enough to recognize; that their competition (Apple) will kill them, or, they will dominate this space. Will be interesting to see how this plays out.
It helps that Apple Music has been relatively terrible from the start. I fully expect them to get significantly better, but after Rdio died (RIP, and I got over my mourning) I did the Apple Music trial plus a couple months. Both the wife and I found it incredibly difficult to navigate and understand. Spotify has been much, much better.
That said, Apple Music is only going to get better, and fast.
Re: Spotify raises $1B in debt with devilish terms to fight Apple Music
#39At this scale, debt is always bad option. There are not many company in the world which can repay more than 1billion$ with interest. The demand of debt at this level is so low, that either they should be doing it at pretty low interest rates or not at all.
It's debt but it's pretty clearly meant to convert into equity not be re-paid.
Spotify will never be worth enough for that converted equity to be worth the cost.
Re: Spotify raises $1B in debt with devilish terms to fight Apple Music
#40This is significant. It shows a do or die attitude and a fact that many companies at this level are not self-aware enough to recognize; that their competition (Apple) will kill them, or, they will dominate this space. Will be interesting to see how this plays out.
Good point - it's all or nothing for Spotify, they are not profitable at current scale and need critical mass re: subscribers + defense against Apple, and if they don't get there, then they are dead anyhow.