Spotify Takes on $1.3B in Debt

Spotify is offering $1.3 billion in exchangeable notes it can pay off with cash or stock, while building its war chest for acquisitions or other purposes

2/25/2021 3:42:00 AM

Spotify is offering $1.3 billion in exchangeable notes it can pay off with cash or stock, while building its war chest for acquisitions or other purposes

Spotify is offering $1.3 billion in exchangeable notes it can pay off with cash or stock, while building its war chest for acquisitions or other purposes.

Rafael Henrique/SOPA Images/LightRocket via Getty ImagesThe streaming giant is offering exchangeable notes it can pay off with cash or stock, while building its war chest for acquisitions or other purposes.Spotify USA intends to offer $1.3 billion in exchangeable notes due in 2026, the company announced Wednesday. In addition, Spotify USA expects to grant the initial buyers of the notes an option to purchase an additional $200 million.

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Spotify Stock Hits New High, Valuing Company at $72BWhile some music companies have taken on debt during the pandemic — including Live Nation and Madison Square Garden Entertainment — or sold notes to replace existing debt, Spotify has operated and acquired companies with cash on hand. During 2020, Spotify had $259 million in cash from operations and posted a net increase of $172 million in cash and cash equivalents. Its balance sheet had cash and cash equivalents of $1.15 billion of cash and cash equivalents and no long-term debt.

Exactly how Spotify intends to use the money is unclear. The press release broadly states the company intends to use the proceeds for “general corporate purposes” -- a term loose enough to cover capital expenditures, marketing or strategic acquisitions. Such a large amount suggests Spotify doesn’t intend to use the money for everyday costs of running the company. Instead, $1.3 billion is enough to make numerous acquisitions to build out its podcasting business, for example, and have a cushion for any uncertainty its leadership foresees in 2021 and beyond. headtopics.com

Spotify's Music Leaders on the Streaming Giant's 'Audio-First' Future: ExclusiveSpotify will reserve the right to redeem the notes in a variety of scenarios. Until March 20, 2024, Spotify has the option to redeem the notes with cash, shares or a combination of the two if the company’s share price “exceeds 130% of the exchange price for a period of time.” Spotify USA can also redeem the notes “at any time in connection with certain changes in tax law.”

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