In case you missed it, the creator’s loss is Spotify’s gain. No, today is different than usual, because this time Spotify’s gain is not just tied to the misery of artists and songwriters, it’s actually tied to the whole world. According to TechCrunch:
The coronavirus may be decimating some corners of the economy, but the impact on the digital music, as evidenced by the world’s biggest music streaming company, appears to be minimal. Today Spotify reported its earnings for Q1 with revenues of €1.848 billion ($2 billion at today’s rates) and an inching into a positive net income of $1 million. Monthly active users (not total subscribers) now stand at 286 million, with paid (premium) users at 130 million and ad-supported monthly active users at 163 million. Ad-supported users are growing at a slightly higher rate at the moment, at 32% versus 31%, Spotify said.
So far today, SPOT is up $16 a share, which means Daniel Ek made roughly $656,000,000 today alone. And that doesn’t count the warrants.
So the bubbly is flowing at World Trade Center or wherever the Spotify elites are hiding out.
Just like at your house, right?
Do they care about your problems?
Variety reports that the Spotify corpcomms book “Spotify Untold” is getting an order from Netflix for a series telling the story of Spotify’s “creation” featuring–guess who? The levitational awesomeness of Daniel Ek. No word on who will play David Lowery, Melissa Ferrick, Bob Gaudio or Brownlee Ferguson. So Netflix–which screws songwriters–is promoting Spotify–which also screws songwriters. And joins into Spotify’s lawfare campaign against Apple.
According to Variety, it’s not a question of astroturf writ large, it’s “a case of one disrupter [Netflix] telling the story of another [Spotify], Netflix has boarded a series about the creation of Spotify, the Swedish startup that’s become one of the world’s leading music services.”
So where’s what’s not mentioned in the Variety story on the Netflix deal is the Bergman-esque cheap shot at Apple the “authors” of “Spotify Untold” take at Steve Jobs on his death bed. This one is just bizarre and is the kind of thing you could imagine oozing from the mind of Daniel Ek. Maybe instead he should have been styled in a badminton game with Jobs. (I drill down on the loose ends in this storyin another post.)
Barely a page into the book “Spotify Untold,” Swedish authors Jonas Leijonhufvud (pictured at left) and Sven Carlsson paint an odd scene. The year is 2010 and Spotify co-founder and CEO Daniel Ek is facing a succession of obstacles gaining entry into the U.S. market — or, more specifically, infiltrating the tightly-networked and often nepotistic to a fault music industry. As stress sets in, Ek becomes convinced that Apple’s Steve Jobs is calling his phone just to breathe deeply on the other end of the line, he purportedly confesses to a colleague.
Which aspect of this story got them a Netflix deal? Was it the heavy breathing? Or maybe the corporate funding.
There’s a saying, “don’t speak ill of the dead.” That’s probably a bit superstitious for the Spotify Untold authors, but is good advice. It’s unbecoming and Spotify should denounce it. There’s also a saying, “don’t mock the afflicted,” so before you laugh hysterically at the story, realize that Steve Jobs caring enough about Daniel Ek to do such a thing (which assumes Steve knew Daniel Ek existed) was something that was very important to Daniel Ek
One thing I can tell you is that the Steve legend (a competing hero’s journey myth–a real one) has some choice tales of voice mails. None of them involved heavy breathing, and Variety reports that the authors were not able to confirm this rather insulting and perverse allegation.
So why bring it up in their book or in press interviews?
UPDATE: This post originally appeared on 9/24 in MusicTech.Solutions before reading that on 9/23 Wells Fargo initiated coverage of Spotify at “Underperform” with a $115 price target. (The stock touched $115 during the trading day on 9/24). As of this writing, the consensus price target is $159 according to NASDAQ’s Marketbeat. And of course, streaming’s massive consumption of electricity is becoming an issue faster than you can say “data center.”
Analyst Mark Hake has developed three different scenarios for where Spotify’s stock price will be in 2021: $125.68, $61.42 and $38.39. He assigns a $114.89 price based on a probability analysis. About where it is at the close today, in other words. His post in Seeking Alpha (“Spotify Has A Valuation Problem”) is a must read if you’re interested in financial analysis. (I predicted about a year ago the stock would retrace to the $120 to $130 range before dropping below $100 and that it would happen sooner than later.)
As analyst BNK Invest noted after the close last Friday (9/20):
In trading on Friday, shares of Spotify Technology SA (Symbol: SPOT) entered into oversold territory, hitting an RSI reading of 26.8, after changing hands as low as $120.63 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 56.4. A bullish investor could look at SPOT’s 26.8 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.
This chart is from today’s trading and it reveals a couple interesting patterns–they may mean nothing, but then again they might. It’s not so much that Spotify is now trading about $20 below its self-assigned private company valuation of $135. That’s not a comfortable feeling as it says that investors would have been $20 a share better off if the company had never had its controversial direct public offering (or “DPO”) and just stayed private.
What’s interesting about this chart is not so much the price but rather the volume. Spotify is a very thinly traded stock that typically has relatively low volume. When you see larger volume around the opening and the close of trading it may indicate certain motivations of sellers. Particularly if there are holders of large blocks of shares that want to slip out of their position when nobody is (a) noticing or (b) can do much about it.
Because of the nature and “rules” of the DPO, Spotify doesn’t have the typical underwriting syndicate that helps to keep the price somewhat stable to allow the stock to establish a trading range with support levels. Instead of the underwriters selling to the public, Spotify insiders are selling their shares to the public, which then of course can be resold. In an underwritten public offering, insider shares are usually subject to a “lock up” period where insiders cannot sell their shares for a period of time, say 90 to 180 days after the first public offering.
Spotify had no lock up on insiders. So who has an incentive to sell their shares relatively quickly?
It’s hard to know who is doing the selling unless you’re a transfer agent with access to the master shareholder list, and they probably wouldn’t disclose that information for anyone under certain thresholds. But it is odd and it’s been similar patterns for a week or so.
Chris Castle discussion of Eight Mile Style lawsuit against Spotify under Music Modernization Act (driving with dogs series, a One Take Wonder Production)