Music Streaming Leader Spotify Takes A Stake In Investors Valueact

Spotify Technology SA has been acquired by investment firm ValueAct Capital Management, in an effort supported by Daniel Ek's strategy to reduce spending and become more efficient at the music-streaming company.

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 In a presentation at Columbia University on Friday, ValueAct Chief Executive Officer Mason Morfit described the company's investment as their "newest investment," citing its innovative business model. During the day, shares jumped up to $126.55 by more than 4.7%. 

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In remarks viewed by Trade Algo, Morfit said in remarks at the Columbia Student Investment Management Association that were viewed by Trade Algo that Spotify's superpower was its combination of engineering breakthroughs with organizational abilities - it organized creators and copyright owners to create a new economic model based on all sides. In the boom period, podcasts, audiobooks, and live chat rooms were among the new markets where it applied these strengths. Content funding and operating expenses skyrocketed. In order to determine what was built to last and what was built as a bubble, it is now sorting out what is of long-term value.

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Its thesis with New York Times Co. last year was to increase prices and improve margins to earn more profit from subscriptions. ValueAct has worked with some of the world's most prominent companies. 

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It wasn't clear how much money Spotify invested, according to Morfit. 

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Adam Grossberg, Spotify's spokesman, said, "We are glad to have ValueAct as an investor." A ValueAct representative could not be reached for comment. 

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A massive commitment to podcasting was made by Spotify in 2019, which Morfit believes invented music streaming. Among the shows it acquired are The Joe Rogan Experience and Armchair Expert, which cost over a billion dollars each. 

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In recent years, investors have had to deal with ballooning costs. In the past year, investors have been unsure when they will start seeing returns on their investments. The Spotify podcast business is set to become profitable between one and two years from now, according to executives in June. A recent announcement stated that the company would be cutting 600 employees, about 6% of its total workforce. 

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Trade Algo wrote in a note that ValueAct's stake in Spotify indicates Spotify's turnaround efforts are taking hold. As podcasting investments are moderated, operating losses should be pared and the company should break even by 2024 with a reduction in headcount and cost cuts."

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 As businesses emerge from a venture capital-fueled bubble, Morfit touched briefly on Spotify at the end of the presentation.

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 Morfit said there was a regime change occurring. There will be a great sorting between businesses built for the long haul versus those built to go up and down with the market." In other words, rules are going back to being important." 

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Salesforce Appointment 

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In addition, Morfit highlighted the stock's decline of 60% since its high and how he was appointed to the board of Salesforce Inc. last month. A number of activist investors, including Elliott Investment Management, remain interested in Salesforce.

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 Salesforce is now being forced to chart a new course in order to balance growth and profits, employee culture and employee efficiency," he said. This is what you're looking for in the cave.". There is going to be an even greater explosion of power." 

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With its 2000 founding, ValueAct has requested changes at corporations such as Citigroup Inc., Seven & I Holdings Co., and Nintendo Inc. At the end of September, ValueAct held stakes in Fiserv Inc., Seagate Technology Holdings Plc, and the New York Times, among other companies.