Spotify Stock Buy Back In The Works
In an effort to stem its dropping stock price yesterday Spotify’s Board approved a plan to buy back up to $1B in stock. As I reported last week, Spotify’s share price has dropped 20%+ in the last month due to a combination of factors including a tech sector sell off and their own decelerating MAU growth. By approving a plan to buy back up to 4% of outstanding shares Spotify hopes to stabilize its equity price.
While it’s not that unusual for companies to buy their stock back, this isn’t the only interesting financial move coming out of Spotify lately. During last Thursday’s Q3 earnings call they surprised investors with a first-ever quarterly net profit of $48M. But you need to read the fine print on this one. The profit was thanks was to a one-time maneuver in which they revalued their equity position in the Chinese streamer Tencent, who’s getting ready to go public (Spotify owns 9% of Tencent). The Tencent bump added $141M to Spotify’s bottom line in Q3, which turned a $93M operating loss into a paper profit.
For the record, there’s nothing wrong with either of these accounting moves. But it sort of feels like they’re starting to use gimmicks to keep up the perception of a high-velocity growth stock.