Spotify Shares Rise After Reports of Activist Investor ValueAct Taking Stake

ValueAct Capital Management has taken a stake in Spotify Technology SA, at a time when the audio streaming company is looking to cut costs.

"We welcome ValueAct as an investor in Spotify," a spokesperson for the Swedish company said on Friday, without disclosing further details on the investment.

Spotify's shares rose 3.5 percent to $125 (nearly Rs. 10,300).

ValueAct Chief Executive Mason Morfit disclosed the investment during a presentation at a Columbia University event in New York on Friday, according to Bloomberg News, which first reported the stake.

ValueAct, which declined to comment, distinguishes itself from other activist investors by preferring to stay behind the scenes and rarely presents its investment ideas publicly.

It has been investing more frequently in Japan in recent years, but has also made investments in US companies including Microsoft and Citigroup.

Meanwhile, Spotify has invested heavily in building up its podcast and audiobooks business in 2022, with operating expenses growing at twice the rate of its revenue.

However, a challenging economic environment set the stage for belt tightening, with Spotify Chief Executive Daniel Ek announcing layoffs and an organisational restructuring in January.

In January this year, the company announced plans to cut 6 percent of its workforce, adding to the massive layoffs in the technology sector in preparation for a possible recession.

"Over the last few months we've made a considerable effort to rein in costs, but it simply hasn't been enough," Chief Executive Daniel Elk said in a blog post announcing the roughly 600 job cuts.

Spotify's operating expenditure grew at twice the speed of its revenue last year as the audio-streaming company aggressively poured money into its podcast business, which is more attractive for advertisers due to higher engagement levels.

© Thomson Reuters 2023