Google is considering a $500 million acquisition of SoundCloud

According to a report posted on the Music Business Worldwide. After Spotify had backed out to acquire SoundCloud, Daniel Ek reportedly plumped to spend Spotify’s $1bn convertible debt raise on international expansion and shoring up his business for an IPO attempt later this year.

Now it appears Google is “the current favorite” to take advantage of the Berlin-based company’s continuing losses, with a cut-price $500 million deal seemingly on the table. The publication also claims that it has acquired SoundCloud’s latest financial report, which confirms that each of the three major record labels – Universal, Sony and Warner – all own stakes in the company. If a sale to Google happens, all three major labels will get a windfall.

A Confirmation Statement filed at the UK’s Companies House on December 21 reveals that SoundCloud Ltd is comprised of 4,676,273 shares – 355,351 of which are categorized as ‘Ordinary Class A’. (Also included in the total are 678,333 Series A shares; 818,195 Series B shares; 341,846 Series C shares; 42,074 Series C-1 shares; 463,546 Series D shares and 724,459 Series E shares.)

Music business interest is led by Universal Music Leisure Ltd, which owns 191,472 Ordinary Class A shares, plus 2 Series D shares.

Sony Music Entertainment owns slightly fewer shares, controlling 134,056 Ordinary Class A shares, plus 2 Series D shares.

Warner Music Inc, meanwhile, owns just 29,823 Ordinary Class A shares. However, WMG – the first major music company to license SoundCloud back in 2014 – also owns 32,755 Series D shares.

A rough approximation (not taking into account individual value of shares – which are likely to increase these stakes slightly) gives Universal a 4% holding in the company, with Sony on 3% and Warner on somewhere between 1% and 2%.

If SoundCloud was sold for $500m, the majors would therefore get a cut of around $45m between them. These share percentages are likely to have been diluted as SoundCloud has taken on more investment since agreeing to apportion Universal and Sony equity as part of global licensing deals in 2016.

If SoundCloud does sell to Google, it could be the beginning of a major shake-up in music streaming land in 2017.

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