Universal Music Group (UMG), company behind some of the world’s biggest music acts, announced on Wednesday, April 29, that it will sell part of its ownership stake in Spotify, and use the money to fund an expanded share buyback programme worth $1 billion — roughly $1.17 billion.
A share buyback is when a company uses its own money to buy back its shares from investors, a move that typically makes the remaining shares more valuable. The sale will reduce UMG’s ownership of Spotify from about 3 percent to 1.5 percent. At a current Spotify share price of around $443, the deal is worth approximately $1.4 billion.
But here’s the twist, artists may actually see some of that money too. Under what is being called the “Taylor Swift clause,” a provision dating back to 2018, a portion of the proceeds from the Spotify stake sale must be shared with artists. The timing is also significant. Billionaire investor Bill Ackman recently made an offer valuing Universal at around $65 billion, and as part of that proposal, he suggested selling Universal’s entire Spotify stake.
By selling only a part, on its own terms, UMG appears to be sending a message that it is perfectly capable of managing its own house. Alongside the announcement, UMG reported first quarter revenue of $3.3 billion, roughly flat compared to the same period last year.
For a music giant, it is a very deliberate note to end on.
