latest updates from the Aeon Group

Spotify Planning IPO

Spotify struck up a deal to raise $1 billion in convertible debt from investors – a deal that extends the company’s runway but comes with guarantees.

In return for the financing, Spotify promised its new investors strict guarantees tied to an IPO. If Spotify holds a public offering in the next year, TPG and Dragoneer will be able to convert the debt into equity at a 20% discount to the share price of the public offering, according to two people briefed on the deal. After a year, that discount increases by 2.5 percentage points every six months, the people said.

Spotify also agreed to pay annual interest on the debt that starts at 5% and increases by 1 percentage point every six months until the company goes public, or until it hits 10%.. This interest — also called a “coupon” and in this case paid in the form of additional debt, rather than cash — is commonly used in private-equity deals but rarely seen in venture funding.

As noted by several publications, Spotify recently hired longtime tech banker Paul Vogel as its first-ever Head of Investor Relations. According to Recode, Spotify confirmed it has indeed hired Vogel in this capacity, though it refused to comment further on the matter.

Vogel, who has worked in several tech-focused roles across multiple bulge bracket banks, will report to Spotify’s CFO Barry McCarthy, whom the Swedish music upstart poached from Netflix last year. Reports indicate Vogel’s primary task will involve shaping the business and investing storylines that the company will pitch to secondary market investors on its eventual IPO roadshow.

Thanks to this recent development, it appears Spotify’s IPO plans have accelerated, making a 2016 IPO all the more plausible.