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Investors reportedly to decide on future of SoundCloud today

By | Published on Friday 11 August 2017

SoundCloud

SoundCloud’s shareholders have until the end of the day to approve a rescue plan for the flagging streaming music firm,¬†according to Axios, which cites a memo seemingly sent to the company’s investors earlier this week.

As previously reported, after SoundCloud laid of 40% of its workforce last month, it was indicated at a staff meeting that the company only had finance in place to keep the business running into the fourth quarter of this year. However, management at the firm insisted that it had a long-term future as an independent entity, suggesting talks to sell the business outright to another digital company – such as Spotify or Deezer – were now off the agenda.

Bloomberg then linked New York bank The Raine Group and Singapore’s state investment fund Temasek to the company, reporting that both intended to pump money into SoundCloud. The newswire said that although the two new investment deals were separate, the new investors would between them control more than half of SoundCloud’s stock.

That arrangement – which seemingly cuts down SoundCloud’s current valuation fourfold – needs the approval of existing shareholders, hence the memo. According to Axios, that document basically implies to the firm’s other investors that they either back this deal now or the SoundCloud business is in serious danger of folding in the near term.

Or, in the words of the memo itself: “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 event SoundCloud does not otherwise obtain additional funding, based on current cashflow forecasts, SoundCloud faces liquidity concerns in the near term”.

It’s thought that The Raine Group will likely play a hands-on role in setting SoundCloud’s future strategic direction if the new financing deal goes ahead, utilising its experience as an investor in other media and web outfits. SoundCloud, of course, has been busy trying to pivot its business away from selling hosting services to content creators and into the more conventional streaming business model of selling subscriptions to music fans.



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