I was just saying the other day how Pandora is a cruddy music service and that Spotify is much, much better. Well this morning, it was announced that Spotify had raised $1B in convertible debt through the likes of private equity firm TPG, hedge fund Dragoneer, and some people over at Goldman Sachs.
Essentially Spotify is giving guarantees for its new backers that are tied to a potential IPO, which could mean trouble for those jerks over at Pandora.
Some specifics of the deal..
If the company decides to hold a public offering in the next year, TPG and Dragoneer can convert their debt into equity at a 20 percent discount to Spotify’s IPO pricing
Spotify will also pay annual interest on the debt that starts at 5 percent and increases by 1 percentage point every 6 months until the company goes public, or until its debt obligations rise to 10 percent. – Benzinga
Mark my words, Spotify will reign supreme over Pandora.
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I’d love to hear why you think Spotify is so much better than Pandora but if you are a Spotify bull this is not a good thing. This is pretty desperate financing….close to a hail mary….if the markets close off to IPOs like it has currently Spotify will be paying $100mm in interest a year in relatively short order….companies have been broken by much lower interest payments. The terms of this convert would’ve been much better if there was a lot of interest from investors.
I actually just logged into my Pandora account for the first time in 3 years because you asked this question and I must say, I see nothing much has changed.
And it seems my music taste was a tad sporadic back then hahah.
Personally, I enjoy that I can actually create custom playlists of the music I enjoy as well as be at the mercy of Spotify’s radio feature. I feel that their premium service offers more value than Pandora’s does in the way that not only can I skip songs as much as I want but I can actually search specific songs and play them. Rather than search a song on Pandora and listen to songs “similar to this” when I just want to listen to THAT song.
Spotify bull? Probably not. Given that I don’t have the particular resources to know the ins and outs of Spotify’s financials since they are private I cannot comment on whether I would be a bull. I do love their product and enjoy their platform very much but I care more about the bottom line than anything else. If they were to go public and I can compare their financials to Pandora’s I can give you an answer to that. Maybe it’ll surprise me and as a stock Pandora’s will look better but I do feel that Spotify’s service is better.