Spotify’s decision to secure a $200 million credit facility has investors talking – but is the music streaming giant really considering an IPO? …
Swedish music streaming service Spotify, founded by entrepreneur and technologist Daniel Ek, has been raising eyebrows in recent weeks. Investors, record labels and tech companies alike have watched as it has positioned itself for a rumoured initial public offering (IPO).
Last week the company announced it had acquired The Echo Nest, a music intelligence service which uses a kind of machine learning technology to handle data about music that can then be used to provide recommendations to users for new music that is similar to their current preferences.
But now, Spotify has negotiated itself a $200 million (£120 million) supply of credit from lenders including JPMorgan, Credit Suisse and Goldman Sachs which has sent the online rumour mill into overdrive. Is one of the world’s most popular streaming services about to float on the stock exchange?
Spotify has never officially stated that it is headed towards an IPO, but it certainly appears that it is looking at going public. Zynga, Twitter and Facebook all secured credit facilities for themselves before they went public, and all had values in the billions. Donors are often willing to offer generous terms for high-potential companies, which is often because they are hoping to be chosen as underwriters in the event of a flotation.
Moreover, it would be a logical progression for a company which is known to be making a loss. If Spotify is to expand, it will need funds from external backers, and access to credit will encourage investor confidence. Its acquisition of The Echo Nest, which also supplies data to many of Spotify’s competitors, will strengthen its market position and put it in a much better position for growth.
Still, there’s another sense in which Spotify is following in the footsteps of the technology giants. Facebook’s purchase of WhatsApp and Instagram, Twitter’s acquisition of Vine and Google’s moves into venture capital all point to a similar pattern – tech companies are consolidating their own positions by getting stakes in their competition.
Spotify no doubt sees the acquisition of The Echo Nest as an important step towards improving its own recommendations and attracting new customers with a better service offering. But it’s also a step on the road to making itself every bit as indispensable in the world of music streaming as the other media and technology giants.
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