Spotify is reportedly raising $1 billion in debt financing from TPG, Dragoneer, and clients of Goldman Sachs, as reported by Wall Street Journal’s Douglas MacMillan. Why? This has something to do with steaming up the competition against Apple Music whose launching competitive and cool features for existing apple users. Aggressive terms between this deal are part of the intrigue for when this deal won’t take off. This would mean that their investors will get to convert the debt to equity at a 20% discount of the share price Spotify sets for an eventual IPO. And if they don’t go public next year, that discount goes up 2.5% every extra six months.
Spotify claimed that they will be using the fund for growth expansion and marketing. According to CEO Daniel Ek, Spotufy has 30 million paying subscribers as of the month of March. This decision marks their hopeful commitment to winning the race. That would include convincing musicians and artist to sign exclusive deals with them and upping their game in terms of mobility and whatnot. Though it would be early to tell if they have made a bad decision for waging a music war with Apple but considering SoundCloud or Pandora in the picture, the competition can only get tougher.
