TPG Capital to hold talks with Spotify over $1bn bond

TPG Capital, a huge private equity firm, is planning to hold formal talks with Spotify about how a bond it holds along with other investors would convert into shares in the music industry.

Last year, TPG and Dragoneer Investment Group - another fund - invested $1bn in the bond, which could convert into equity when Spotify launched an initial public offering (IPO) in New York.

However, Spotify is supposedly seeking a $10bn valuation when it goes public and leaning towards an alternative route of direct listing.

This would mean Spotify’s existing equity be listed on a public exchange, which would avoid the music company having to issue new shares to TPG and Dragoneer and potentially save millions in fees to investment banks.

Speaking to Sky News, a TPG spokesperson commented: “[We have] a strong relationship with Spotify.

“We continue to work collaboratively with the company and any suggestion otherwise is categorically false.”

It has been said that TPG and Spotify will discuss the conditions in due time, and how the the firm can be treated with respect if its debt doesn’t automatically convert to shares when the company goes public.

The Swedish-based music service, which has accumulated 60m paying subscribers, has such customers pay a fixed fee every month in exchange for unlimited access to 30m songs.

It should be said that Spotify is yet to clarify whether it will pursue a direct listing or an IPO, and no negotiations have been made so far.

Spotify has declined to comment on this issue, however, according to Sky News, someone close to the music streamer confirmed that “the convertible debt would not turn into equity if it pursued a direct listing.”

In 2015, Spotify was valued at $8.5bn and has raced ahead of its rivals including Apple. The company has also struck a licensing agreement with Sony Music, and a similar agreement with Warner Music Group is said to be imminent.