3 ms·

Didn't they have a clause in their last round of financing, that if they didn't go public in 6 months, they'd lose a lot of money (per month)?

openmosix 10y ago
Yes, found it http://www.digitaltrends.com/music/spotify-raises-1-billion-dollars-ipo/ http://www.digitaltrends.com/music/spotify-raises-1-billion-... "Investors, according to the Wall Street Journal, will be able to convert the debt into Spotify shares at a 20 percent discount if the company has a public offering in the next year, with that discount rising two and a half percent every six months Spotify doesn’t go public. Until then, Spotify will also pay a five percent interest rate on the debt. That’s an amazing investment for those who were given the opportunity to make it — five percent on their money up front, and a huge discount on stock when Spotify goes public. Essentially, if Spotify doesn’t immediately go under, they stand to make a lot of money on their initial investment no matter what happens."
- Someone 10y ago
  "if Spotify doesn’t immediately go under, they stand to make a lot of money on their initial investment no matter what happens" I don't understand your logic; it's not "when spotty goes public"; it's "if Spotify goes public". If, say, Spotify doesn't go public (yet) and goes down after X years, they will have received 5X% of their investment back in interests, and will have the rights to buy lots of by then worthless Spotify shares at an enormous discount. For X < 10, I don't see that as making money at all; X = 10 might sort-of break even. I think Spotify had to give them those share options to get that 5% interest rate because investing in Spotify is risky.
resharker 10y ago
Convertible debt as to not dilute the share pool. As is typical, there are also financial incentives to VPs to make the IPO happen in time. It would be very interesting to know if the lenders of the 1B anticipated this and are planning to immediately offload their highly discounted stock before shredding the company to pieces for their 1B. Might be hard, considering the massive liability they're taking on with the new New York office.
- hkmurakami 10y ago
  Even in such a scenario the $1B would be offloaded to investment banks during the road show who will in turn off load it at the IPO price to its client base. They won't dump it into the open market on opening day.
pbreit 10y ago
From the article: "Spotify may also be looking to renegotiate some of its financing that had been pegged to the timing of the IPO."
- DarthMader 10y ago
  Why would investors choose to renegotiate? They seem to have all the leverage here. Spotify also have shown no history for meeting their commitments to stakeholders

openmosix 10y ago

Yes, found it http://www.digitaltrends.com/music/spotify-raises-1-billion-dollars-ipo/ http://www.digitaltrends.com/music/spotify-raises-1-billion-... "Investors, according to the Wall Street Journal, will be able to convert the debt into Spotify shares at a 20 percent discount if the company has a public offering in the next year, with that discount rising two and a half percent every six months Spotify doesn’t go public. Until then, Spotify will also pay a five percent interest rate on the debt. That’s an amazing investment for those who were given the opportunity to make it — five percent on their money up front, and a huge discount on stock when Spotify goes public. Essentially, if Spotify doesn’t immediately go under, they stand to make a lot of money on their initial investment no matter what happens."

Someone 10y ago
"if Spotify doesn’t immediately go under, they stand to make a lot of money on their initial investment no matter what happens" I don't understand your logic; it's not "when spotty goes public"; it's "if Spotify goes public". If, say, Spotify doesn't go public (yet) and goes down after X years, they will have received 5X% of their investment back in interests, and will have the rights to buy lots of by then worthless Spotify shares at an enormous discount. For X < 10, I don't see that as making money at all; X = 10 might sort-of break even. I think Spotify had to give them those share options to get that 5% interest rate because investing in Spotify is risky.

resharker 10y ago

Convertible debt as to not dilute the share pool. As is typical, there are also financial incentives to VPs to make the IPO happen in time. It would be very interesting to know if the lenders of the 1B anticipated this and are planning to immediately offload their highly discounted stock before shredding the company to pieces for their 1B. Might be hard, considering the massive liability they're taking on with the new New York office.

hkmurakami 10y ago
Even in such a scenario the $1B would be offloaded to investment banks during the road show who will in turn off load it at the IPO price to its client base. They won't dump it into the open market on opening day.

pbreit 10y ago

From the article: "Spotify may also be looking to renegotiate some of its financing that had been pegged to the timing of the IPO."

DarthMader 10y ago
Why would investors choose to renegotiate? They seem to have all the leverage here. Spotify also have shown no history for meeting their commitments to stakeholders