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Documents reveal: Spotify seeks billions in funding

Spotify seeks 4,3 billion SEK in loans from investors. The loan may later be converted into discounted stocks. SvD has read secret documents that reveal the Swedish digital music giant's plans of going public.

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Secret documents reveal the Swedish digital music giant's plans of going public.

Secret documents reveal the Swedish digital music giant's plans of going public. Foto: Ingvar Karmhed

Next week Spotify will meet investors in Stockholm and introduce their company. The company's financial advisor Goldman Sachs and Swedish bank Nordea are hosting the meeting with Spotify executives at Nordea's head office in Stockholm.

The goal is to get 500 million dollars (4,3 billion SEK), that are to be used to fund the company's plans of expansion. The investors will not be allowed to buy stocks in the music streaming company now but are instead offered a so called convertible – a loan that can later be converted into stocks in Spotify.

Spotify pays four percent interest for the borrowed money, and there's another advantage in lending money to the company. If Spotify's owners choose that the company should go public within a year, the lenders will be able to change their loans for stocks in Spotify – with a substacial rebate of 17,5 percent.

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"The loan can be automatically converted into stocks in connection in the event of the company going public. Should an IPO take place within a year the rebate will be 17,5 percent/…./after one year the rebate will increace 2,5 percent every six months", is written in the summary of conditions for the convertible.

Screenshot from Spotify's document. Foto: SvD

Exactly what Spotify is using the billions for is not stated, but the company stresses that there will soon be huge possibilities of growth in new markets.

The music streaming service is now available in 58 countries. In December 2015 Spotify said that they had approximately 45 percent of the users on the entire world market. That is a substantial increase from the numbers in December 2013 when Spotify had 24 percent and the competitors 76 percent.

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    The annual increase of paying users has since 2012 been 69 percent. Since July last year Spotify has more than 20 million paying customers and 75 million active users.

    This is not the first time Spotify seeks new funding from investors and there have been speculations before about an IPO being imminent. The fact that future owners of converitbles will receive a significant rebate on Spotiy's stock is a clear sign that the company's IPO is getting closer, according to investors that SvD Näringsliv has spoken to.

    In June 2015 it was announced that Barry McCarthy had been appointed new Finance Chief at Spotify. It is likely that McCarthy, who is a former chief financial officer at Netflix, joined the company to bring it through going public in 2016.

    The main listing will probably be the US, but the Stockholm stock exchange and it's owner Nasdaq is working hard for Spotify to also be listed in Stockholm.

    SvD Näringsliv has sought a comment from Northzone, one of Spotify's major stockholders.

    Translation from Swedish: Jessica Carleson.

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    Secret documents reveal the Swedish digital music giant's plans of going public.

    Foto: Ingvar Karmhed Bild 1 av 2

    Screenshot from Spotify's document.

    Foto: SvD Bild 2 av 2
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