Spotify posted a record quarterly operating profit in the third quarter of this year, with CEO Daniel Ek predicting that 2024 will be the company’s “first full year of profitability”. That’s a merry Christmas in store for the company’s executives and directors – enhanced by the fact that several have sold some of their shares in the wake of the positive results.
MBW covered the story on Friday, reporting on sales by Spotify’s two co-founders. Ek sold 75,000 of his shares valued at $35.8m according to a filing with US financial regulator the SEC, while the company owned by co-founder Martin Lorentzon sold 959,762 shares for $383.75m.
However, a flurry of other filings since the financials announcement reveal more sales. Co-president, CPO and CTO Gustav Söderström sold 79,888 shares valued at $38.4m, while VP of finance Ben Kung sold 7,092 shares at a market value of $3.2m. Chief human resources officer Katarina Berg sold 46,545 shares for $22.3m, while general counsel Eve Konstan sold 16,234 shares for $7.3m.
Former chief financial officer Barry McCarthy had three separate filings, selling 22,000 shares for just under $10m; 21,500 for just over $10m; and 20,900 for just under $10m. Meanwhile directors selling shares included Shishir Mehrotra ($3.7m), Heidi O’Neill ($1m); Thomas Staggs ($3.8m) and Mona Sutphen ($3.1m).
This is all part and parcel of how a public company works. Directors and executives’ recompense includes shares; they sell off those shares from time to time to realise cash; and the period after quarterly financial results is a responsible time to do it. The last week’s selloffs are not unusual in that regard.
Two thoughts, though. First, the optics around this within some music circles of execs and directors selling more than $532m worth of shares (or $149m without Lorentzon’s bumper sale) in the week the company revealed that reclassifying its premium tier as a ‘bundle’ has saved it €94m (just under $100m) so far in mechanical royalty payments in the US.
The two figures may not be related, but the juxtaposition will be pointed to by Spotify’s critics, and the company should (and surely will) be prepared for this. It’s the same dynamic when Universal Music Group execs sell shares or are awarded big bonuses – witness the periodic headlines made by shareholder and/or activists’ views on boss Sir Lucian Grainge’s remuneration.
Second, however: the selloff is a reminder of how Spotify’s valuation has soared in 2024. On 2 January, the first day of trading this year, Spotify’s market cap (value) was $37.22bn. At the time of writing it is now $92.03bn, including a spike of nearly $10bn since last week’s financial results.
By investor metrics, then, 2024 has been a barnstorming year for Spotify, and few in that financial world would see anything strange in the company’s senior leadership and directors being rewarded for that success.
But as with many aspects of its business, Spotify continues to face the task of balancing the expectations and views of Wall Street with the opinions of the community of artists and songwriters who remain at the heart of its growth.
