A US fund manager has sold half of its stake in Spotify months before the music-streaming service makes its long-awaited debut on the New York Stock Exchange (NYSE).
Sky News has learnt that DE Shaw, which acquired its interest in Spotify in 2015, offloaded roughly 12,000 shares in the company last month at a price of $4,060-per-share – which placed a valuation on it of just over $16bn (£12bn).
The sale came even as Spotify was making a confidential filing with the US Securities and Exchange Commission (SEC) to take itself public through the unusual mechanism of a direct listing.
This route to the stock market would not involve issuing any new shares to raise additional capital, but simply list its existing shares.
Sources close to DE Shaw’s share sale said the fund manager had sold out at roughly double the $8bn valuation at which it had initially invested nearly three years ago.
Secondary share trades such as this are not unusual, with buoyant demand for Spotify stock pushing its valuation to ever-higher levels over recent months.
Last summer, Sky News revealed that various Goldman Sachs entities had sold more than $75m of Spotify shares even as the Wall Street bank was cementing its role as an adviser on the music company’s public listing.
The Goldman shares sales were made at a price of $3,100 each, more than 20% below that paid to DE Shaw just four months later.
The buyers of DE Shaw’s stake were vehicles affiliated to hedge funds Tiger Global Management and Blue Ridge, the latter of which has since drawn up plans to close its doors.
Other Spotify shareholders to have reduced their exposure to the company in recent months were Fidelity, the giant American asset manager.
Under Spotify’s articles of association, shares must be offered to existing investors before being sold to a third party.
The music-streaming company, which has struck licensing deals with record labels including Universal Music Group in recent months, has also announced a share swap with Tencent Music Entertainment, a Chinese peer.
Spotify’s attempt to go public via a direct listing rather than a conventional initial public offering would save substantial sums on underwriting fees but more significantly reduce the amount of money owed to investors in interest as part of a convertible debt instrument issued in 2016.
The company has amassed 70m paying subscribers since its launch, and financiers believe it is likely to seek a price tag of about $20bn when its shares begin trading publicly.
Its alliances with the major music publishers has brought big-name artists such as Adele, Beyoncé and Taylor Swift – who had previously objected to Spotify’s business model – into the streaming service’s long-term catalogue.
The Swedish-based music service has surprised some music industry analysts with its rapid subscriber growth over the last year, although it lost nearly €175m in 2015.
Its paying customers hand over a fixed fee each month in exchange ?for unlimited access to tens of millions of songs.
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The explosive growth of such services, with rivals including Apple Music and Deezer, saw more than 68bn songs streamed last year, according to the BPI trade body.
Spotify and DE Shaw both declined to comment.