Spotify’s management team talked about a lot of things in the company’s ‘Stream On’ event earlier this week, but one announcement was saved for later. Yesterday the streaming services announced plans for an ‘exchangeable senior notes offering‘ from its US subsidiary to raise $1.3bn.
It’s debt funding, essentially. “The notes will be senior, unsecured obligations of Spotify USA, will accrue interest, if any, payable semi-annually in arrears and will mature on March 15, 2026, unless earlier repurchased, redeemed or exchanged,” explained Spotify. Investors will be able to exchange the notes for cash, Spotify shares or a combination of the two, but not until after 20 March 2024.
What does Spotify need $1.3bn for? “Spotify USA intends to use the net proceeds from the offering for general corporate purposes,” is all the announcement says. Note, according to Spotify’s latest financial results, the company ended 2020 with “€1.8 billion in cash and cash equivalents, restricted cash, and short term investments and no indebtedness”.
The last two words are key there: Spotify had no debt on its balance sheet, a position that enabled it to take on debt now for… purposes. Let the speculation begin about whether those purposes include something big in the near future: what might Spotify be interested in buying that costs a few hundred million dollars – or even a big-splash acquisition of a $1bn+ unicorn?