ValueAct Capital Management has taken a stake in Spotify Technology as the audio streaming company looks to cut costs.
“We welcome ValueAct as an investor in Spotify,” said a spokesperson for the Swedish company. However, no further details were disclosed about the investment.
Spotify’s shares rose 3.5% to $125 after the news broke out. The investment comes as the company has been investing heavily in building up its podcast and audiobook business, which resulted in operating expenses growing at twice the rate of its revenue.
However, the challenging economic environment has led to belt-tightening, with Spotify CEO Daniel Ek announcing layoffs and organizational restructuring in January. The company said it would reduce its staff headcount by about 6% as part of the restructuring efforts.
ValueAct distinguishes itself from other activist investors by preferring to stay behind the scenes and rarely presenting its investment ideas publicly. The firm has been investing more frequently in Japan recently but has also invested in US companies, including Microsoft Corp and Citigroup Inc.
ValueAct CEO Mason Morfit disclosed the investment during a presentation at a Columbia University event in New York, according to Bloomberg News, which first reported the stake. ValueAct declined to comment.
The investment from ValueAct is seen as a vote of confidence for Spotify, which has gained 61% in 2023. According to Dow Jones Market Data, the company’s shares surged 5.1% on Friday to $127.03, putting the stock on pace for its highest close since April 2022.
In conclusion, the investment from ValueAct in Spotify is a positive development for the audio streaming company, which is looking to cut costs and navigate the challenging economic environment. The investment is expected to support the company’s cost-saving efforts after several years of spending heavily on content.