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Goldman Sachs Sells Off $75 Million in Spotify Shares (Report)

A Goldman Sachs hedge fund has sold more than $75 million in Spotify shares, while another part of the company has been helping the streaming service to prepare for its public listing, according to a report in Sky News.

The shares, sold by Goldman Sachs Investment Partners, represent “less than half” of its stake in the Swedish-based company, the report says, citing a source person close to the transactions. Reps for Spotify and Goldman Sachs did not immediately respond to Variety’s requests for comment.

The report notes that “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 $10 billion.” Another source defended Goldman’s move, saying that it had “practical reasons to sell a small stake.”

Several sources place Spotify’s value at $13 billion.

Facing an uncertain outlook on a traditional IPO, last month reports emerged that Spotify is considering a direct listing, whereby the company would list its existing equity instead of selling new shares.

The service has been gradually removing roadblocks to such a listing, signing long-term licensing deals with Universal Music Group and Sony Music, leaving Warner as the only major without a renewed deal (the previous deal expired last year, but continues under its terms until a new one is struck). The company is expected to reach a deal with Warner in the coming weeks.

The company announced late last month that it had passed 60 million subscribers — up 10 million from March — and a total of 140 million total users in June.

However, its revenue and operating loss grew significantly in 2016, according to the company’s annual financial statement released in June. Spotify showed an operating loss of some 349 million Euros ($389 million) compared with a 236 million Euro loss the previous year.  Its gross profit was just $502 million. “This is explained by substantial investments that have been made during the year, mostly in product development, international expansion and a general increase in personnel,” directors Daniel Ek and Par Jorgen Parson wrote in the filing. The company also said it will pay record labels at least $2 billion in royalties over the next two years.

The company has also been dogged by lawsuits from publishers claiming underpayment of royalties, as well as accusations that it is playing a role in the creation and promotion of “fake artists,” who are paid a flat fee and no royalties, which some claim saves the company millions of dollars. Spotify has denied any participation in this practice.

 

 

 

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