Spotify (SPOT) Debt Deal Increases Likelihood of M&A - Stifel
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Stifel analyst John Eggbert reiterated a Buy rating and $360.00 price target on Spotify (NYSE: SPOT) after the company announced the pricing of $1.3B aggregate principal of 0% exchangeable senior notes due March 2026 via a private offering, with the option for initial purchasers to buy an additional $200mm principal amount of notes within 13 days from the date the notes are first issued.
The analyst stated "The offering substantially increases Spotify's M&A / podcast investment flexibility, while the structure of the raise (raising exchangeable notes through its Spotify USA subsidiary rather than the parent company) may result in favorable tax treatment." "The offering should leave Spotify with approximately $3.4B in cash & equivalents on its balance sheet (~$3.6B if the additional $200mm option is exercised in full) after Spotify's first debt raise as a public company. With a substantial cash balance prior to the offering and steady positive FCF generation since 2016 (even amid significant content / M&A-related investments in 2020), Spotify's debt offering provides the company with even more flexibility to invest in podcast content / future M&A."
Shares of Spotify closed at $307.38 yesterday.
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