Universal is sitting on billions of dollars in Spotify stock. If it sells its stake today, it will trigger a massive payout for artists — but that’s not the only reason it should cash out now
As controversial as it is to talk about in the music industry, major record labels of the world still own sizable chunks in Spotify. But there’s a case to be made about why they should sell their billions of dollars’ worth in shares — and specifically now.
It started in 2008 when, according to documented evidence, the major record companies plus indie body Merlin each received equity stakes in Spotify as a result of their licensing agreements with the upstart streaming company. Sony BMG (now Sony Music) got the biggest stake of at 6%; Universal Music Group got 5%; Warner Music Group got 4%; EMI Music got 2%; Merlin got 1%.
Prior to Spotify going public on the New York Stock Exchange in April 2018, a couple of things happened to change this ratio: First, Universal acquired EMI Music, including the latter firm’s Spotify holding, taking its stake up to 7%; second, due to years of additional investment and share issues in Spotify, by the time the streaming service went public, the major record companies’ percentage stakes had been slashed by around half — leaving Universal Music on approximately 3.5%, Sony on 3%, Warner on 2%, and Merlin on 0.5%.
However, Sony Music paid its own money to acquire additional equity after 2008, which we know for a fact took its holding in Spotify to 5.7% by 2018. Sources in the investment community have speculated to me that Universal Music — the biggest record company, home to artists like Taylor Swift, Kendrick Lamar, and Lady Gaga — may also have since upped its Spotify holding, and could now sit on 4.2% to 4.8% of the streaming company.