Sony Music Entertainment sold a chunk of its shareholding in Spotify yesterday, taking home over $250m for its trouble.
Before Spotify started publicly trading on the New York Stock Exchange yesterday afternoon around 1pm ET, Sony owned 5.71% of shares in the company.
According to a memo to shareholders from Sony Corp in Tokyo today (April 4), Sony Music sold 17.2% of this equity yesterday.
That made up around 0.98% of Spotify in total.
Judging by Spotify’s closing valuation on the NYSE last night – $149.01 per share, equivalent to a market cap of $26.5bn – the stake sold by Sony would have been worth over $250m at the time it cashed in.
UPDATE: Sony Corp predicts its total profit on its shareholding, including the stock it sold yesterday, will be 105bn Yen, or just under $1bn – that’s based on yesterday’s closing price. It expects this gain will be recorded in the quarter ending March 31, 2019.
Sony maintains the rest of its Spotify stake, said Cony Corp – at least for now – and, despite anticipating some ups and downs on the NYSE, is confident of further profit.
That remaining stake makes up around 4.7% in Spotify.
Sony Corp said in its statement: “Due to this public listing and the sale, Sony expects to record an unrealized valuation gain (net)* for the shares SME continues to hold and a realized gain for the shares sold (net)*, both in Other income, in accordance with U.S. GAAP.
“the sum of the unrealized valuation gain (net) and the gain on the sale of shares (net) to be recorded for the first quarter of the fiscal year ending March 31, 2019 would be approximately 105 billion yen in total.”
“Based on the NYSE closing price on April 3, 2018 (U.S. Eastern Standard Time) and the sale price, the sum of the unrealized valuation gain (net) and the gain on the sale of shares (net) to be recorded for the first quarter of the fiscal year ending March 31, 2019 would be approximately 105 billion yen in total.
“Because the market value of Spotify’s stock following the public listing may be volatile, Sony expects such unrealized valuation gain (net) could fluctuate during the period that SME continues to hold the shares, including during the first quarter of the fiscal year ending March 31, 2019.”
It confirmed that Sony’s original 5.71% stake in Spotify was worth 5.082% on a fully diluted basis.
A Sony Music spokesperson told MBW yesterday: “Sony Music and The Orchard are committed to sharing with their artists and distributed labels any net gain they may realize from a sale of Sony Music’s equity stake in Spotify.
“This is consistent with our previously announced policy of sharing breakage and equity proceeds from digital catalog licenses with our artists and distributed labels.”
Sony was permitted to sell Spotify shares yesterday under the SEC’s Rule 144a.
Rule 144a permits non-affiliates of a company, who have owned their shares for at least a year, to sell to qualified institutional investors.
As such, Sony didn’t have to register its shares for resale with the SEC before trading.
Spotify’s current price on the New York Stock Exchange is bobbing at around $140.3 on the NYSE, suggesting a current valuation in the region of $25bn.
See today’s Sony Corp memo to shareholders below.