Universal Music’s Spotify Stock Could Be Worth $2B
Universal Music Group still owned 6.487 million shares of Spotify -- or 3.59% of outstanding shares -- on Dec. 31, according to financial results the company disclosed ahead of going public.
Universal Music Group still owned 6.487 million shares of Spotify — or 3.37% of outstanding shares — on Dec. 31, according to detailed financial results the company disclosed Wednesday in anticipation to being publicly traded by the end of September.
On Dec. 31, 2020, Spotify closed at $314.66 per share but has fallen since and on Friday (May 14) it closed at $223.59. Since UMG put the average share purchase price of 6.58 euros ($8.10) on April 13, 2018, the day Spotify shares began trading), if it sold the shares at the Dec. 31 closing price, UMG would have realized $2.04 billion, or a profit of $1.99 billion after subtracting out the combined share purchase price of $52.54 million.
If it still holds the shares, their current value is $1.45 billion — which would yield a profit of nearly $1.4 billion if sold at Friday’s share price.
UMG and the other major labels, Sony Music and Warner Music Group, each took equity as part of their licensing deals that allowed Spotify to launch in the U.S. in 2011. As of Dec. 31, UMG maintained a larger equity stake in Spotify than any of its competitors. Sony Music sold half its 5.707% stake for $768 million following Spotify’s IPO in April 2018, leaving it 5.082 million shares a 2.85% stake at the time — a percentage that would have been diluted since then. (Based on Warner Music, meanwhile, confirmed in August 2018 that it sold its full 4% stake for $504 million.
In March 2018 UMG committed to giving its artist a share of its Spotify profit — probably equivalent to whatever percentage royalty they are paying specific artists. Later that year, Taylor Swift revealed her new contract with the label included a condition that ensured “any sale of [UMGs] Spotify shares result in a distribution of money to their artists, non-recoupable.” Sony and Warner both paid artists a portion of their profits.
Spotify isn’t the only streaming service Universal has an ownership stake in, though. The company’s filings also revealed that it owned nearly 12.25 million shares of Tencent Music Entertainment as of Dec. 31, or 0.74% of outstanding shares.
While UMG didn’t disclose what share purchase price it paid for Tencent shares, on Dec. 31 those shares closed at $19.24. If UMG sold at that price, it would have realized $235.6 million. If UMG still holds those shares and sold at Friday’s 15.21 close price, the company would realize $186.3 million.