Some people have gotten large discounts on Spotify shares over the last few weeks, and one of the largest shareholders writes down its shares.
On tuesday evening, the news broke that Spotify has raised almost $1 billion in convertible debt from hedge fund Dragoneer and venture capital firm TPG, among others.
Other than the loan itself, the deal includes a clause that lets the investors convert the loan to actual shares at a 20 percent discount when Spotify goes public. The discount increases by 2,5 percentage points for every six months that the music streaming service holds off on its IPO.
The company is expected to go public within two years.
Breakit can now reveal that the stock is already traded outside of the stock market, and that discounts are even higher than 20 percent.
“I know that the share price has been below $1,500 in some cases”, says one of Breakit’s sources. That number is also confirmed by several other sources familiar with the matter.
$1,500 per share can be compared to the share price at the time of the last big capital round, in June 2015. The share price was around $2,200 at that time. One of the reasons why the share price seems to have dropped by over 30 percent is that there are different kinds of shares in Spotify.
The shares that are being sold on the private market are ordinary shares, and not preference shares, which are first in line when dividends are paid out. This system forces preference share holders to pay a premium fee.
However, the large valuation change is noticeable. The trading has been made in part because of tax planning, according to Breakit’s sources, which has contributed to higher discounts.
At the same time, some larger share holders are questioning the company valuation. In January investment company Fidelity wrote down its Spotify shares by 27 percent, according to Wall Street Journal (paywall). Fidelity has previously written down its Snapchat holdings on several occasions.