Will SoundCloud’s Last-Ditch Rescue Plan Save Millions of Songs?

SoundCloud remains strapped for cash, and teetering on bankruptcy.  Now, there’s a rescue plan in the works.

SoundCloud may sell stakes in the company to two private equity firms, according to Bloomberg.  The two unnamed equity firms would acquire stakes in SoundCloud via separate deals.  All in all, the ‘acquisition lite’ would cede most of the ownership control, while keeping the lights on (and millions of songs online).

The talks come as the streaming platform faces the threat of bankruptcy.  During advanced acquisition talks with Spotify last year, the company was reportedly valued at $1 billion.  Talks fell through once Spotify realized that the acquisition would slow their IPO plans (among other serious issues).

The collapsed deal did little to inspire confidence.  Earlier, CEO Alexander Ljung warned investors that it may close its doors this year.

“SoundCloud may run out of cash earlier than December 31, 2017… These matters give rise to a material uncertainty about the Group’s ability to continue as a going concern.”

Several top executives have since jumped ship as those prophetic words played out.  Downplaying the high-profile exits, SoundCloud merely stated that their COO, as well as their finance director, “felt it was time to move on to new adventures.”

The company then lost another top executive.  Stephen Bryan abruptly resigned from SoundCloud last month and joined YouTube as the Head of Label Relations.

In February, SoundCloud begged German investors for $250 million, 75% less than it was worth a year earlier.  The leak prompted the company to blast the Financial Times, calling the report “fake news.”  Re/Code would later confirm the report, stating that the company would accept at least $100 million to remain operational.

Earlier this month, SoundCloud laid off 40% of its staff.  They also closed down their London and San Francisco offices.  In a private all-hands meeting, the company’s co-founders admitted that they only had fifty days left to cash to survive.  The news prompted an unnamed employee to say,

“I don’t believe that people will stay.  The good people at SoundCloud will leave.  Eric [Wahlforss] said something about the SoundCloud ‘family,’ and there were laughs.  You just fired 173 people of the family, how the f—k are you going to talk about family?”

Once the news leaked, Alexander Ljung attempted to quell bankruptcy rumors.  He assured the media that the company “was well funded into Q4 2017.”  It was also “here to stay.”

Fast-forward to now.  Talks with the two private equity firms are currently “at an advanced stage.”

Sources close to the talks warned that they could still fall apart.

And there’s always the possibility of another surprise savior.  Earlier this month, Deezer spoke with SoundCloud about a potential sale.  However, according to Bloomberg, Ljung has rejected the sale proposals.  He prefers that the company remain independent.


Featured image by YouTube (screen grab)