Last week, Daniel Ek bought $50 million worth of Spotify stock. Today, Spotify’s share price hit an all-time low.
Spotify’s stock price on the New York Stock Exchange closed down 9.78% today (May 9), hitting an all-time low of $94.44.
This share price fell by 61.3% compared to the price that Spotify closed on the first trading day of 2022 ($244.16), and was almost a quarter of the size that Spotify reached at its peak ($364.59) in February last year.
Indeed, in the 15 months since that peak – on February 19, 2021 – Spotify’s market cap valuation has fallen a bit more. $51 billion (see table below).
It seems unlikely that all of this is in the scenario that Daniel Ek had in mind on Friday May 6th.
That day, Ek announced to investors via Twitter that he bought personally $50 million in the Spotify stock (which closed that day at $104.68) because he believed that “our best days are ahead”.
Ek tweeted: “II’ve always said loud and clear that I believe in Spotify and what we’re building. So I’m putting that belief into action this week by investing $50 million in $SPOT. I believe our best days are ahead of us…”
He added: “While I am not required to disclose these purchases due to our status as a foreign company, I thought it was important for shareholders to know.”
Public markets, of course, are generally impacted by macroeconomic factors right now, including inflation and rising interest rates in the United States.
The NYSE Composite – an index reflecting the performance of all common stocks on the stock exchange – was down 3.27% today (9 May).
Ek’s personal acquisition of Spotify stock is reminiscent of Michael Rapino, CEO/Chairman of Live Nation, who bought $1 million worth of stock in his company in March 2020.
Rapino made the transaction just as it was becoming clear that the pandemic would shut down many elements of LN’s global operations in the months — and potentially years — to come.
From the time Rapino made that stock purchase to today, Live Nation’s stock value has more than doubled.
(At press time today, Live Nation’s stock price on the NYSE closed at $85.37.)
Spotify received a lukewarm response from analysts to its Q1 2022 earnings report last month, despite healthy gains in both global subscriber numbers and monthly active users (excluding Russia).
The number of global Spotify subscribers increased by 2 millions quarter-on-quarter in Q1 2022, rising to 182 million subscribers worldwide. That’s up from the 180 million subscribers the company had at the end of 2021.
This net growth was achieved despite the previously announced loss of SPOT 1.5 million subscribers in Russia in the first quarter, where Spotify no longer charges users following the invasion of Ukraine.
However, some analysts weren’t impressed with Spotify’s gross margin result.
Spotify posted a first-quarter gross profit margin in the mid-20s (25.5%) and announced that it expected that figure to remain stable in the second quarter.
Investors wanted to see that gross margin jump to 30%, thanks in large part to Spotify’s original podcasting content strategy.
In September 2019, Paul Vogel, Spotify’s Chief Financial Officer, told investors: “If you think about what has really changed in music and where our growth [came] of… people talk about the importance of being on Spotify and Discover Weekly playlists and that sort of thing. It was really about creating the discovery and appropriating the discovery.
“When you own the discovery, you own a lot of the ecosystem; you own demand generation. And, over time, you end up owning gross margin when you own discovery and demand generation.
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