Is Spotify Setting the Stage for an IPO?

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Source: Spotify

Source: Spotify

Music streaming service company Spotify could be looking to access the debt market in a big way. People familiar with the matter tell Bloomberg that Spotify has engaged Goldman Sachs Group Inc. (NYSE:GS), which is also an investor in the company, in talks about raising a credit facility.

The news has fueled speculation that Spotify is gearing up to announce an initial public offering. Spotify’s peer group appears to include Internet and technology startups like Facebook, Inc. (NASDAQ:FB), Twitter, Inc. (NYSE:TWTR), and Zynga, Inc. (NASDAQ:ZNGA), which all sought credit facilities shortly before their own IPOs. In the eyes of many on Wall Street, Spotify falls into the same bucket these companies did before they were bankrolled by the public market.

Spotify Co-Founder and CEO Daniel Ek (who is just 30 years old) championed Spotify’s image as a high-octane tech and Internet startup in an August 2013 interview with the Wall Street Journal. Like its peer group at this stage, Spotify has hemorrhaged cash, reporting loses of $72 million on $576.4 million in revenue in 2012. Further like its peer group at this stage, the losses haven’t fazed the venture capitalists. A fundraising round at the end of 2013 valued the company at $3 billion, losses and all. Along with Goldman Sachs, Spotify counts Hong Kong billionaire Li Ka-shing among its investors, as well as former Facebook president and Napster co-founder (also a billionaire) Sean Parker.

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