When it comes to Spotify liquidation, Sony Music isn’t f—ing around! The major label has now cashed nearly 50% of its Spotify shares, according to an announcement from parent Sony Corp.
That’s roughly $760 million in cash for the major label and umbrella company Sony Corp., across two liquidation events. The first — a 17.2% divestiture — happened on Spotify’s first day on Wall Street and realized approximately $260 million in gains. The second happened at some point last week, and purged 32% more.
The result is a cash-out of 49.2% of Sony’s original share total.
The exact payout depends on the exact prices at which Sony sold. Spotify’s share price last week fluttered between $146.02 and $161.51, so a cash-out in the middle yields approximately $760 million — give or take around $20 million in either direction.
Ahead of the IPO (or public offering to be exact), Sony Music carried a healthy 5.7% share in Spotify. That stake is now below 3%.
The divestiture was disclosed by Sony on Friday. Sony Corp. CFO Hiroki Totoki shared the details with Wall Street on Friday, and more information was disclosed in a company filing. “Sony owned 5.707% of Spotify’s shares (5.082% on a fully diluted basis) at the time of the public listing, approximately half of which have been sold to date,” the company stated.
The next part of the disclosure confirms Sony’s intent to pay its artists, sub-labels and sub-publishers a cut.
“Due to the public listing and the subsequent sale of a portion of such shares owned by Sony, Sony expects to record an unrealized valuation gain for the shares Sony continues to hold after the listing and a realized gain for the shares sold, net of the estimated amount to be shared with its artists and distributed labels,” the statement continues.
“The sum of the unrealized valuation gain (net) and the gain on the sale of shares (net) to be recorded for the fiscal year ending March 31, 2019 is expected to be approximately 100 billion yen in total [roughly $910 million].”
Earlier, Sony Music issued public statements declaring its intentions to distribute any Spotify payouts with its artists, sub-labels, and other stakeholders. But that invites an incredibly complex set of calculations, starting with the costs of transacting the Spotify purchases and cash-outs themselves.
Beyond that lie even dicier questions, including how artists, sub-publishers and sub-labels should be compensated. What’s the metric? In many cases, Sony Music invested its own cash to grow an act or acquire a sub-label. So how much of that is ‘recouped’?
All questions Sony has to sort through, with potentially far-reaching implications for other major labels.