Spotify wants to buy back up to $1bn in shares

23 aoû 2021 - 13:59

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Spotify last week announced that it would buy back up to $1bn worth of stock from shareholders starting in the third quarter of 2021, which ends in September.

Spotify’s stock price has plunged 30% on the New York Stock Exchange this year.

The proposed repurchase includes about 10 million of the company’s ordinary shares that have been approved by shareholders. The approval to repurchase will expire on 21 April 2026.

Companies issue share buybacks for several reasons, and especially when they believe their stock is undervalued by the market but shows strong potential for future growth. Spotify’s stock has plunged more than 30% on the New York Stock Exchange since the start of the year, hitting a 2021 record low of $202 per share last week. The announcement has raised optimism among shareholders with more than a 5% spike in the company’s shares following the news.

“This announcement demonstrates our confidence in Spotify’s business and the growth opportunities we see over the long term,” Spotify’s chief financial officer, Paul Vogel, said. “We believe this is an attractive use of capital, and based on the strength of our balance sheet, we continue to see ample opportunity to invest and grow our business.”

Spotify is not obliged to acquire any number of ordinary shares, and the company can suspend or discontinue the buyback programme at any time.

The company has noted that the actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.

The repurchase programme would be “executed consistent with the company’s capital allocation strategy, which will continue to prioritise aggressive investments to grow the business,” it said.

It’s worth noting that, when juxtaposed to 2020, Spotify’s stock has performed well, and some investors say they are unmoved by the decrease. At the end of June, Spotify had about $2.85bn in cash and cash equivalents, according to SEC filings.

Speaking to investors during a quarter two earnings call, Vivendi’s chief financial officer, Herve Philippe, said: “[We] have no intention to sell our stake in Spotify, which is a very good partner for us … We are a happy shareholder of Spotify.”

Spotify