Jay Z's Legal Notice to Former Tidal Owners Alleges 'Systemic Errors' Over Four Years

Jay Z 2015
Mike Pont/FilmMagic

Jay Z attends 2015 Throne Boxing at The Theater at Madison Square Garden on Jan. 9, 2015 in New York City. 

Yesterday, Norwegian paper Dagens Næringsliv reported that Jay Z had served a legal notice to the former owners of Tidal, then publicly run by Swedish company Aspiro AB, for misrepresenting the number of subscribers that its WIMP and Tidal streaming services accrued. Today, the paper obtained and published a copy of what they claimed is the letter, which was sent to several of the company's former shareholders, including Streaming Media AS which controlled a 75.9 percent stake in Aspiro. (Tidal declined to comment on the veracity of the letter.)

The letter, sent by Swedish law firm MAQS Advokatbyrå on behalf of Tidal's holding company Project Panther Bidco Ltd., says that Panther conducted due diligence between late 2014 and the Jan. 30, 2015 bid to buy the company. In reviewing the contracts and financial information provided -- much of which was public information -- Panther was informed that Aspiro's streaming services had accumulated 540,000 subscribers, which it has since alleged was not the case.

"It recently has come to Panther's attention that certain information was either omitted or misrepresented during the due diligence process," the letter says. "Panther recently discovered a systemic error in the manner in which Aspiro was calculating its subscription numbers that existed for approximately four years prior to the Offer. It also appears as if Aspiro's costs (including, but not limited to, open accounts payable) were significantly understated compared to the actual figures, as was its working capital. Further, there appear to have been misrepresentations about the existence of valid publishing and other contracts."

Tidal, which Jay purchased for $56 million, announced this week that it had passed three million paid subscribers in the first year since its March 30, 2015 launch event. In a statement released yesterday, the service painted the legal proceedings in a positive light. "The growth in our subscriber numbers has been even more phenomenal than we’ve previously shared," it read. "It became clear after taking control of TIDAL and conducting our own audit that the total number of subscribers was actually well below the 540,000 reported to us by the prior owners. As a result, we have now served legal notice to parties involved in the sale."

Later in the letter, which can be read in full here, MAQS writes, "As a result of Aspiro's material misrepresentations, Panther has suffered significant damage, for which Panther reserves the right to claim compensation."

In an email to Dagens Næringsliv, media company Schibsted, a former Aspiro shareholder, called the proceedings "baseless allegations." Reps from Tidal declined to comment further.