Photographer: Victor J. Blue/Bloomberg

Spotify Is Seeking More Than $500 Million in Convertible Debt

  • Loans could be converted into stock in a public offering
  • IPO of world's largest music service still 1-3 years away

Spotify Ltd., the world’s largest paid-music service, is trying to raise more than $500 million with a loan that could be converted into stock if the company goes public, according to a person familiar with the company’s plans who declined to be identified.

Spotify, which said in June that it had more than 20 million subscribers, hired Goldman Sachs Group Inc. as its adviser, said two people, who asked not to be named discussing the private effort and wouldn’t discuss terms such as valuation. Nordea Bank AB is also an adviser, according to the Swedish daily Svenska Dagbladet, which reported on the fundraising on Wednesday. The people didn’t discuss valuation. Spotify, based in Stockholm, was valued at about $8 billion when it raised money last year.

The loans would give Spotify flexibility to grow and make acquisitions as the market for streaming music consolidates. A planned initial public offering is between one and three years away, according to one of the people. Pandora Media Inc., the Internet radio pioneer, agreed in November to buy Rdio’s assets for $75 million. Spotify bought two companies this month aimed at making it easier to discover and share music with friends.

Spotify is also facing new competition from big players.  Apple Inc.’s Apple Music has amassed more than 10 million subscribers since summer, while Pandora, the world’s largest online-radio service, is planning an on-demand music service.

Other competitors, such as Deezer SA and SoundCloud, have either raised money or licensed music from record labels in the past month. Record labels have heralded on-demand streaming as the future of the music business, in the hopes that enough people will pay for monthly subscriptions to end nearly two decades of declining sales.

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