MBW told you last week that SoundCloud was imminently going to sell a majority stake in its business to two investment funds – The Raine Group and Temasek Holdings.
That deal is almost signed, sealed and delivered.
Now MBW hears another twist in the tale: industry sources are telling us that the company’s new owners want to instate a fresh CEO – former Vimeo chief exec Kerry Trainor (pictured).
That would spell the end of the corporate reign of SoundCloud’s co-founder Alexander Ljung, who has acted as its CEO since 2007.
Business site Axios has obtained an internal SoundCloud memo sent earlier this week which confirms that Raine Group and Temasek Holdings have submitted a $169.5m investment proposal.
SoundCloud’s current investors have a deadline of end of play Friday (August 11) to decline or accept.
Our sources, who are close to the deal, tell us an acceptance is considered a “foregone conclusion”.
Ljung notes in the memo that by turning down the approach, SoundCloud would not be able “to continue as a going concern.”
MBW heard last week that the investment would value loss-making SoundCloud at $300m – which, at the funding price, would deliver the firm’s new investors 58% of the company.
However, in the internal note, SoundCloud shareholders are told its valuation is even lower – a ‘$150m pre-money enterprise valuation’.
“In the event that the transaction does not close and in the vent SoundCloud does not otherwise obtain additional funding, based on current cashflow forecasts, SoundCloud faces liquidity concerns in the near term.”
You’ll notice that the investment ($169.5m) is actually bigger than the proposed valuation of the entire company, which speaks volumes about SoundCloud’s debt – and its perilous finances.
Reads the memo: “Financing of this size will enable to Company to pay off its remaining debt, while ensuring a strong, independent future.
“In the event that the transaction does not close and in the vent SoundCloud does not otherwise obtain additional funding, based on current cashflow forecasts, SoundCloud faces liquidity concerns in the near term.”
Kerry Trainor stepped down as CEO of Vimeo last summer after four years in the role.
Before joining Vimeo, Trainor was SVP of Entertainment at AOL for two years.
He also served stints as the CEO of FlipGloss Media and head of global media products at Yahoo Music.
In the last set of finances we have for SoundCloud from 2015, the firm posted an operating loss of €48.6m ($54m) and a net loss of €51.2m ($57m).
Both figures were more than double the size of its revenue in the year, which reached €21.1m ($23m).
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