Spotify Rumored To Be Nearing $400M Raise, Suggesting Over $8B Valuation; Pandora Shares Rally

Shares of Pandora Media Inc (NYSE: P) surged 3.83 percent to $17.64 in Friday’s after hours trading session following news that Spotify AB was rumored to be raising capital.

According to The Wall Street Journal, Spotify was near to raising $400 million in a round that would value to the music-streaming service at $8.4 billion.

“The deal would place Spotify in the upper ranks of the world’s most highly valued private-tech companies. Goldman Sachs Group Inc. and an Abu Dhabi sovereign wealth fund have agreed to invest in the round, and Spotify has held talks with a range of asset managers and venture-capital firms around the globe,” according to the report.

The company loses money and needs the capital to support its “costly business model of paying nearly 70 percent of its revenue to rights holders as royalties.”

The report highlighted that Spotify’s valuation was more than $5 billion as of last September, according to filings by GSV Capital Corp., which held a stake in the company.

The relatively high $8.4 billion valuation may have been linked to the after-hours rally in Pandora which had a market capitalization of over $3.5 billion while each company operated at a loss.