A multibillion dollar Goldman Sachs hedge fund has quietly sold shares in Spotify even as the Wall Street bank helps the digital music service prepare for an eye-catching public listing in New York.
Sky News has learnt that Goldman Sachs Investment Partners (GSIP) has sold more than $75m of Spotify shares in recent weeks amid demand from other shareholders.
The shares offloaded by GSIP, which manages money on behalf of institutional clients, represent “less than half” of its stake in the Swedish-based company, according to a person close to the transactions.
Insiders said that three GSIP entities – Global Private Opportunity Partners II LP, Global Private Opportunity Partners II Offshore Holdings LP and ODM Investors LP – had collectively sold more than 24,000 Spotify shares at a price of $3100 each.
The aggregate proceeds totalled just over $75m, they added.
Filings suggest that all Goldman entities may have held just over 50,000 Spotify shares at the end of last year, although an insider said the Wall Street bank’s overall shareholding split across different entities was actually three times that level prior to the recent sale.
The trades are likely to attract attention because of Goldman’s role in helping Spotify finance itself as a private company in recent years, and in preparing it to go public with a valuation of well over $10bn.
GSIP is understood to have been a long-term shareholder in Spotify, and one source said the hedge fund had “practical reasons to sell a small stake”.
It was unclear, however, why the disposals were necessary prior to the listing of shares in the music company.
An active private market exists for Spotify stock, and shares have changed hands in recent months at ever-higher valuations.
A person close to the company said the latest price for the shares was about $3400.
Under Spotify’s articles of association, shares must be offered to existing investors before being sold to a third party.
Reports have suggested that a flotation will put a price tag of at least $13bn on the music-streaming service.
Alongside Allen & Co and Morgan Stanley, Goldman is working with Spotify on its flotation plans, which are likely to avoid the usual route that companies take when listing their shares publicly.
An alternative route known as a direct listing would involve listing Spotify’s existing equity rather than selling new shares.
That would save substantial sums on underwriting fees but more significantly reduce the amount of money owed to investors in interest as part of a convertible debt instrument issued last year.
Image: Spotify users pay a monthly fee to access approximately 30m songs
Sky News revealed earlier this week that TPG Capital, one of the backers of that convertible bond, is preparing to hold talks with Spotify about its direct listing plan.
Spotify has amassed 60m paying subscribers since its launch, and financiers believe that it is likely to see a post-listing “pop” in its share price because of the level of interest that will result from its shares starting to trade publicly.
The company recently struck long-term agreements with record labels including Universal Music Group (UMG) and Sony Music – deals which were seen as pre-requisites for going public.
Those alliances brought big-name artists such as Adele, Beyoncé and Taylor Swift – who had previously objected to Spotify’s business model – into the streaming service’s long-term catalogue.
A similar agreement with Warner Music Group is thought to be imminent.
The Swedish-based music service has surprised some music industry analysts with its rapid subscriber growth over the last year, although it lost nearly €175m in 2015.
Its paying customers hand over a fixed fee each month in exchange for unlimited access to approximately 30m songs.
Spotify has outpaced rivals including Apple, and its prospects have improved markedly since it was valued at $8.5bn in a fundraising undertaken in 2015.
Insiders believe a listing is more likely to take place in early 2018 than the fourth quarter of this year.
Goldman Sachs and Spotify both declined to comment.