Activist investor Value Act Capital has made a sizable investment in Spotify weeks after a 6% staff cut was announced by the streaming platform’s CEO.
Value act is known for putting pressure on management and had sold its interest in the luxury car brand Rolls Royce in 2020, 5 years after building a 10% stake in the Financial Times Stock Exchange 100 Index company (FTSE) .
Their investment in Spotify is based on a belief that streaming will grow in the coming years as the platform enters new markets beyond the boom years.
“Spotify’s superpower was combining engineering breakthroughs with organizational abilities — it organized creators and copyright owners to build an entirely new economic model that benefited everyone involved,” Mason Morfit, head of the San Francisco-based investment firm said.
“During the boom, it applied these powers to new markets like podcasts, audiobooks and live chat rooms. Its operating expenses and funding for content exploded. It is now sorting out what was built to last and what was built for the bubble,”
“During the boom, it applied these powers to new markets like podcasts, audiobooks and live chat rooms. Its operating expenses and funding for content exploded. It is now sorting out what was built to last and what was built for the bubble.”
As Spotify contend with keeping their new shareholder happy, the company released a statement saying, “we welcome Value Act as an investor in Spotify.”
Spotify announced that 500 people will lose their jobs from the European company and they aim to become a more “efficient company.” The Daniel EK company lost €430mn last year.
With nearly 500 million users, a Morgan Stanley analyst said they believed speed and efficiency is possible for Spotify “2023 will be the year this business finally marries the consistently strong user and revenue growth trends it has posted for years with a ramp towards meaningful profitability”.
