Business News Digital

Deezer plans IPO on Paris stock exchange by the end of the year

By | Published on Wednesday 23 September 2015


So, Deezer is going to get to the IPO starting line before Spotify.

As previously reported, Bloomberg noted that the French streaming music firm was seeking new finance last month, adding that an initial public offering on one or another stock exchange was one of the options being considered. And yesterday the company confirmed plans to float on the Paris stock exchange Euronext before the end of the year.

For tech start-up businesses, the IPO is often the big pay-day for founders and early backers, though for Deezer it seems to be more about raising much needed new finance to fuel further expansion in an increasingly competitive marketplace rather than current investors seeking their return.

While it has the biggest global reach in the subscription streaming space, Deezer is some way behind Spotify in signing up both freemium and premium users, and is now in competition with Apple too, of course. It’s thought that a bulk of the service’s paying users remain in its home country France where it has had a long alliance with tel co Orange, a shareholder in the company.

The company’s valuation will depend on investor demand but is currently being touted at around €1 billion, or about $1.1 billion, compared to Spotify’s most recent valuation of $8.5 billion. According to Reuters, Deezer says its revenues grew by 53% last year to €142 million and that it hopes to hit a positive monthly operating profit by the end of 2018.

CEO Hans-Holger Albrecht said in a statement yesterday: “Our contemplated IPO represents a key step in the continued development of our business. It will help us expand our offering through innovative marketing campaigns, drive deeper distribution through our telecom and manufacturer partnerships, and further improve our product and content to deliver an even better service for our listeners”.

Aside from Orange, Warner Music owner Access Industries is an existing shareholder in Deezer, as are, of course, the three major record companies, which insist on equity from digital start-ups as part of their initial licensing deals.

The record companies’ equity position in the streaming services has proven controversial in the artist community, with much speculation as to what the labels will do with the money they make when those shares are sold.

The majors at least are expected to argue that because the profits of any share sale cannot be linked to the exploitation of specific tracks they are not obliged to share the income with artists under the terms of a classic record contact. That is probably correct, though artists argue that without the combined value of their recordings the record companies could never have leveraged an equity deal.

We’ve been waiting for a big streaming music firm transaction to occur to bring that argument to the fore, and the Deezer IPO could be it. Though Albrecht added that current shareholders would not sell their stakes in the IPO, and if that includes the labels, then the music community’s big streaming equity row may be pushed back for now.