A billion dollars more for Spotify

Spotify has raised a billion dollars through an agreement by several parties has been called "evil": instead of organizing a round of financing with the issuance of shares, the funds were raised through the issuance of convertible bonds (you is, therefore, a full-fledged debt) with very restrictive terms and related primarily to a possible listing on the stock exchange of Spotify.

In particular creditors (TPG, Dragoneer Investment Group and some clients of Goldman Sachs) will be able to convert their bonds into Spotify shares at a 20% discount in the event that the company's IPO should happen within the next year . If within that period Spotify will not be entered on the stock exchange, the discount grows by 2.5% every six months.

And there's more: it is a debt, there are also the interests. These amount to 5% for the first year, after which it will grow by 1% (up to a maximum of 10%) every six months. Finally TPG and Dragoneer will sell its shares already 90 days after any IPO, well before the 180 days of the so-called "lock-up" period that will be allocated to employees of Spotify and other investors.

To summarize, Spotify was bound in a contract that will become more expensive after the next 12 months. In two years, for example, the injection of $ 1 billion liquidity will have a cost to the company of $ 1.25 billion in equity and more than 100 million dollars in interest. It 'clear that in these conditions the best option for Spotify is go public as soon as possible and that, indeed, the company has agreed to strict conditions so precisely in view of an imminent IPO.

But one question remains: what does Spotify do with a billion dollars? The official line is that it will be used on marketing activities and operations of "growth", whatever that means. From some parts it assumes the possibility of a takeover of a rival service such as Pandora or Soundcloud, an operation which would entail an increase of the debts. A more likely seems to be the one that outlines a strategy of buying more rights to expand the activities in the video world and therefore open up new prospects for business in the future. Another possibility is to have peace of mind sufficient liquidity in order to compete with Apple Music: Spotify currently has a significant market advantage over Apple, but the cash reserves of the Cupertino company are quite conspicuous.

To consider, too, that the injection of a billion dollars cash is in addition to nearly 600 million in cash currently available to Spotify.