Software giant Microsoft is slated to acquire Spotify which is valued at approximately $41.8 billion. The news that powerful tech company is acquiring Spotify was reported by the Wall Street Journal. Both Microsoft and Spotify’s company executives have also confirmed the planned acquisition.
With this, tech analysts claim that there would be an expected valuation at the New York Stock Exchange over the reported acquisition. They also raised the issue of timing as this would mean that Spotify’s planned direct offering would be cancelled. The acquisition also indicates that all Spotify’s pre-order trades are now nullified.
A look at Spotify’s unique approach
Early on, an online report says that the software giant would be acquiring all Spotify’s shares in what they described as a pre-bell acquisition. Granting the report is true, this means that Spotify’s direct offering won’t be necessary. However, financial analysts pointed out that cancelling an IPO would be expensive. Since Spotify would be cancelling a direct offering, it may be not so expensive after all.
Why? Because those who are working as underwriters are marginalized in the context of direct offering. This gives space to make a last-second acquisition more viable. The upcoming deal is actually favourable to Microsoft for owning a streaming music service.
Meanwhile, Jason Rutherford, the Senior Vice President of Entertainment, Music, Gaming & Experiences noted about the possible integration across Microsoft’s platforms including its gaming console Xbox Live.
“We’re excited to better marry the worlds of gaming and music,” Rutherford said. “With Spotify powering a best-in-class musical curation, we hope to create a world-class gaming experience for our users.”
And in case you don’t know, other Microsoft executives like Microsoft CEO Satya Nadella and President/CLO Brad Smith are playing a great role in the upcoming acquisition. Both Nadella and Smith gave a green light to Spotify’s slated direct listing.
“Nadella and Smith recognized Spotify as a missing piece in its overall hardware and software portfolio, with greater capabilities to expand into mobile and virtual reality,” according to Wall Street Journal reporter Nathan Tyler.