Days after former Spotify CFO Barry McCarthy cashed out $10 million in Spotify stock, the company’s co-founder and former chairman is selling $81.5 million in Spotify shares.
According to a filing with the US Securities and Exchange Commission, dated June 7, Martin Lorentzon is planning to sell 255,000 ordinary Spotify shares.
The sale is being done via Rosello Company Ltd., a Cyprus-registered holding company owned by Almatea, a Luxembourg-based firm whose sole shareholder is Lorentzon. The vast majority of Lorentzon’s shares in Spotify are held via Rosello.
The sale represents a small fraction – about 1.2% – of Lorentzon’s Spotify stock ownership. According to the company’s latest annual report, Lorentzon owned 21,476,145 shares of Spotify at the end of 2023, which as of market close on Friday (June 7) would have been worth around $6.62 billion.
With 10.9% of outstanding shares, Lorentzon is the third-largest shareholder in Spotify, behind co-founder and CEO Daniel Ek (15.6%) and Edinburgh-based investment firm Baillie Gifford (12.0%).
However, Lorentzon has the most voting power of any Spotify shareholder. Thanks to his control of 61% of the company’s beneficiary certificates – which confer voting rights, but not economic benefits – Lorentzon has 42.7% of the voting power over Spotify, more even than Ek, at 30.5%.
In April, Daniel Ek sold 400,000 share units in Spotify, with an aggregate market value of USD $118.8 million.
Lorentzon stepped down as Spotify’s board chairman in 2016 after eight years in the role. He continues to have a seat on the board of directors, and in 2023, he was paid $446,964 for that role, entirely in stock options, according to the annual report.
Lorentzon held nearly 72,000 Spotify stock options as of the end of 2023, which are scheduled to vest between 2024 and 2028.
Lorentzon’s stock sale comes after a long, sustained period of growth for Spotify stock, which bottomed out at the end of 2022 at around $75 per share, and has since climbed to more than $308 per share, an increase of 310% over 18 months.
The stock price is close to the record high it hit in late 2020 and early 2021, amid a run-up in the stock prices of companies seen to be benefitting from consumers staying at home during the Covid-19 pandemic.
During that time, Spotify stock reached a peak of around $310 per share, but, like many other darlings of that era, it saw a steep stock slide as the pandemic receded. However, few of those companies have managed to retrace virtually all those losses, as Spotify now has.
The Sweden-headquartered streaming service reported its largest-ever quarterly profit in Q1 2024, clocking an operating income of €168 million ($182.41 million), giving rise to hopes that the company may finally begin to record annual profits after years of losses.
That positive profit number came on the strength of double-digit growth in both subscriber revenue and ad-supported revenue, combined with a 9% decrease in operating expenses. Some of that came from successive rounds of layoffs, which included a 17% workforce reduction announced last December.
Spotify’s Ek has signaled on recent earnings calls that the company is increasingly focused on profitability, where it had been previously focused on subscriber growth.
However, some of its moves to increase the bottom line have proven controversial, not least a decision this spring to classify its Premium subscription packages in the US as “bundles,” as they now include 15 hours of audiobook time per month.
Under the Copyright Royalty Board’s Phonorecords IV rules, digital service providers can pay out a lower mechanical royalty rate to publishers and songwriters from a bundled service than from a standalone music subscription.
That has led to frustration among US music publishers. The National Music Publishers’ Association (NMPA) has accused Spotify of “attacking songwriters” with the move, while The Mechanical Licensing Collective (The MLC), responsible for collecting mechanical royalties in the US, has taken Spotify to court over the new, lower payouts.
The company also faces potential legal action from the NMPA, which accused the streaming service of not obtaining licenses for the lyrics served up to listeners on its platform, among other things.
Spotify has called those allegations “false and misleading.”Music Business Worldwide
