Spotify Investor Floats Possibility of Extremely Unlikely Sale to Facebook
Spotify is currently negotiating with the major labels to get its content deals in place ahead of an expected IPO some time next year. Or is it getting its ducks in a row ahead of a sale to Facebook, instead? Not so fast.
The latter idea was floated today by Joakim Dal, an analyst at European investment firm GP Bullhound, and first reported by Swedish publication Breakit. GP Bullhound is one of Spotify's major investors, and thus has a financial interest in whether or not the streaming service goes public, as is expected.
"We think a US IPO in 2017 is likely but also don't discard the possibility of a sale to Facebook," Dal said, as reported by Business Insider. "Historically, building social networks around its offer has been a weak spot for Spotify. In that sense a deal with Facebook would be something positive. It would also make Spotify stronger against Apple, as Apple today doesn't have a social network connected to its offer."
However, several industry sources have told Billboard that Spotify is completely focused on its IPO, and one source shot down the idea of a sale to Facebook entirely. A rep for Facebook declined to comment; a rep for Spotify did not return a request for comment as of press time.
Back in March, Spotify raised a $1 billion round of funding in convertible debt, which can be either repaid or exchanged for stock in the event of an IPO. But the terms of the investment grow more unfavorable over time, meaning the longer Spotify delays an IPO, the less valuable the deal becomes. In 2015, the company was valued at $8 billion on revenue of $2.2 billion, though its net losses increased to $206 million.
Spotify is currently the largest music streaming service in the world, with more than 100 million monthy users -- 40 million of whom are paid subscribers, a number that is expected to grow to around 50 million by the time of its projected IPO. And GP Bullhound predicts that number could grow as high as 100 million paid subscribers by 2020; put in perspective, the IFPI's 2016 global music report said that there were 68 million paid streaming subscribers worldwide at the end of 2015, a tally that has surely risen in the past nine months but that shines a bit of light on how quickly the space is expanding.
Facebook CEO Mark Zuckerberg and Spotify CEO Daniel Ek have a close enough relationship for Zuckerberg to be in attendance at Ek's wedding last month, and the companies have done several integrations in the past, most recently an update to Facebook Messenger announced earlier this year. And while it's possible that the two could leverage each other's particular skill sets, an outright sale is not likely to be one of those options.