Spotify, the on demand streaming service which is no stranger to making headlines in the news, is now looking for additional cash from investors. Although the company has been valued at figures over $3 billion, many financial analysts are skeptical of this number and are concerned that the company is not operating in a way that will allow it to continue in the long run.
According to Swedish newspsper Dagens Industi, Spotify is looking for a significant investment that would increase the value of the company to over $5.3 billion, representing a 75% increase in the company’s value in just ten months. But is it sustainable? Spotify has been spending a large amount of cash at an alarming rate and as a result has been operating at an increasing loss for the last three years.
Source: Digital Music News
Apparently, Spotify has only received $288 million in financing since it’s inception in 2008. However, the company stated in 2012 that it has already burned through $206 of that amount which makes us wonder if the company will be around for awhile. Spotify also has the option of applying for a straight loan – the kind you pay back with interest instead of giving ownership to shareholders. The Swedish newspaper stated, “Spotify’s two founders, CEO Daniel Ek and Martin Lorenzon, don’t want their holdings diluted . . . Instead they are inclined to borrow money in order to continue to grow at a rapid pace.”