Market Overview

Dragoneer, Other Investors Back Spotify With $1 Billion Debt Deal

Dragoneer, Other Investors Back Spotify With $1 Billion Debt Deal

Spotify, the popular music-streaming site, tapped private equity firm TPG, hedge fund Dragoneer Investment Group and clients of Goldman Sachs Group to raise $1 billion, The Wall Street Journal reported after Tuesday's market close.

Spotify's $1 billion in convertible debt was the preferred method of obtaining financing. The publication noted that convertible debt is preferred among investors as the bonds can be exchanged for stock. Meanwhile, Spotify also benefits as a bond raise "adds to its war chest" without the possibility of issuing stock for a lower price.

Spotify also pledged to its new backers strict guarantees tied to a potential public offering. 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.

Related Link: Pandora Blowing Up The Music Streaming Model Could Be Brilliant

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.

TPG and Dragoneer can cash out their shares 90 days following an initial public offering, rather than the typical 180-day lockup period that employees and other shareholders are forced to adhere to.

The Wall Street Journal, citing "people familiar with the matter" reported Spotify plans on going public within the next two years.

Image credit: Sorosh Tavakoli, Flickr


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Posted-In: Dragoneer Investment Group Goldman Sachs Group Spotify Streaming musicNews Financing Tech Media Best of Benzinga

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