Spotify’s path to a listing on the public stock market faces many hurdles, not the least of which are competing interests and different deal terms with dozens of investors, including the major labels, brought in over multiple funding rounds. Two major stakeholders, TPG and Dragoneer, are already raising concerns about their $1 billion interest in the streamer.
TPG and Dragoneer Investment Group are reportedly reopening talks with Spotify over the terms of their $1 billion bond investment in Spotify.
As we previously reported, under the terms of the 2016 funding, Spotify pays 5% annual interest, adding 1% every six months for a total of up to 10%. Investors can convert their debt to equity at a 20% discount of Spotify’s IPO (or presumably now a DPO) share price. If there is no public offering within a year, the discount at which they can eventually buy stock would increase 2.5% every extra six months. These bonds would convert into equity when Spotify launches its initial public offering (IPO).
The problem is that Spotify is seriously considering forgoing an expensive IPO in favor of a direct listing on the stock market; and that could mean that TPG and Dragoneer don’t get their anticipated returns.
Talks will reportedly start soon to resolve the issue. “It is about working out the art of the possible,” one insider told Sky News.
MORE: Spotify ‘Seriously’ Explores Nixing IPO In Favor Of Direct Listing, Motivated By $1 Billion Funding Terms