Hedge funds are losing interest in Spotify Technology’s playlist.
A little more than 13 months after it went public, a number of high-profile hedge fund firms — or their venture capital arms — are bailing out from the Swedish streaming music company. Several of these sellers initially made their investments in Spotify when it was private and are now cashing out, while others jumped in at or shortly after the IPO.
The rash of large sales from prominent hedge funds that regularly invest in the so-called technology and internet disrupters is significant. Their fleeting support for Spotify sends a loud message that they don’t think the company has the long term potential to join the ranks of the blue-chip disrupters whose stocks they have piled into and stayed in for years. These include Amazon.com, Facebook, and Google — now called Alphabet — and more recent additions like Netflix.
It is also potentially a harbinger of what to expect from the crop of so-called unicorns, or private companies valued at $1 billion or more, that recently went public or are planning to go public.
Spotify went public in early April 2018 in what is called a direct listing — an unconventional route. The shares closed at $149.01 on the company’s first day of trading, up from a reference price of $132 set by the New York Stock Exchange after climbing as high as $169.
The stock closed Friday at $132.76 after peaking at $198.99 and trading as high as $151.19 as recently as late February.
The big first-quarter stock sales from several early major Spotify investors also took place before Billboard reported in April that Amazon is looking into launching a free music service supported by advertising.
Philippe Laffont’s Coatue Management sold its entire stake of nearly 3.7 million shares in the first quarter. Dan Sundheim’s D1 Capital Partners unloaded its entire stake of 755,000 shares.
Tiger Global Management, whose large venture capital business was a big investor in Spotify when it was private, sold about 4.6 million shares, leaving it with 8.2 million shares. Most of the stock is held by its private funds.
Other big hedge fund sellers in the first quarter included Gabriel Plotkin’s Melvin Capital Management, which retained a small stake. It was also a big seller in the fourth quarter.
Several firms liquidated their entire stakes of more than one million shares apiece in the fourth quarter, including Lansdowne Partners and Jericho Capital Asset Management.
Earlier this year Spotify shelled out about $340 million to acquire two podcast companies, Gimlet Media and Anchor FM.
Spotify reported a loss of $78 million in 2018, but this was way down from a loss of $1.235 billion the previous year.
