Last month DMN first broke the story revealing Spotify’s $1billion debt financing.
Now, an official SEC form D filing has been revealed which confirms the earlier reports.
The filing highlights further information beyond those previously outlined and allows us to take a greater look at the conditions of the deal.
It shows TPG and Dragoneer – the issuers of the $1 billion expect the agreed amount to be paid back within one year. It also highlights the fact that Spotify has to pay a massive fee of $19,256,50 in finders fees and sales commission.
What does this mean for Spotify?
Firstly, the large injection of cash into the business allows Spotify to re-invest in its business model which could be exactly what the company needs in order to grow at an accelerated rate beyond its competitors like Apple Music for example. The debt financing also allows them to continue to run the business the way they want to without having investors opinions to consider like they would have to if they went with equity financing.
However, a massive $1 billion to pay back over the course of one year is a huge amount of revenue that the company will have to wave goodbye to. Large monthly repayments can put major financial strain on a company. Not to mention that large figure just short of $20 million that the service has to pay out to Goldman Sachs for just simply securing the financing.
Spotify must have some big plans that it wants to implement in order to require such a large sum of financing. The question is, is it going to pay off? The obvious outcome for Spotify would be for it to leapfrog past its competitors and widen that paid subscriber gap. But, if the financing isn’t placed in the right way it could spiral out of control and Spotify may loose its top spot in the streaming market.
Another issue is that companies often find it easy to take the money but don’t necessarily find it as easy to pay back.
Spotify $1billion Debt Financing Filing
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