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"TPG and Dragoneer can sell their shares just 90 days after the IPO, before the 180-day lockup period ends for Spotify’s employees and other investors."

Among many the bad terms disclosed in the article, IMO this is probably the worst - basically, this right is a license to cash out and torpedo the company within 3 months (just the right amount of time to see how the market reacts to Spotify's first earnings call as a public company..), leaving the other investors (and employee common stock holders!) with greatly devalued stock.

Of course they have a disincentive not to do this: if they did start to sell after 90 days, the stock would start plummeting before they could sell all shares, so the last shares that TPG/Dragoneer sell would be worth much less than the first bucket of shares, but if they do sell it means that things are very, very bad and they'd rather cut their (20% discounted...) losses, and will be much, much better off than the other investors and employees 3 months later.

godspeed Spotify!

Oh, and I would not be surprised if Apple basically times major announcements re: Apple Music (subscriber numbers, if good, or new product features, etc.) around Spotify's IPO date and first earnings call to kill the pricing on both front - if I were Apple, I know I would =)

I have to also assume this has already been considered in the game theory. So something else unexpected, unpredictable perhaps.

Edit: The more I think about it, doing nothing would be most optimal. Doing nothing is so much more cost effective when you know it's a inevitable decline.

Why would Apple care about Spotify's stock price?

Well it's a really dirty tactic, but it can be hard to retain top talent (who are largely rewarded with options/shares) if a company's stock price crashes.

Otoh your chances of hiring that talent are lower if you're the aggressor responsible for the stock tanking

heh true, they might not care at all - Apple makes more $$ in a quarter than several Spotify market caps. But, here's a few theories: if Spotify keeps calling itself the "leader" in streaming and Apple decides it wants this to stop, it would be an easy/cheap way to impact Spotify's brand negatively, and even potentially bring them down entirely. Alternatively, by driving the price down, it could also force Spotify to explore selling itself at a low price (see: Pandora), and if Apple wanted some fast/easy subscribers, it could acquire them cheaply.

One way to leverage a high stock price is through all/part stock M&A transactions.

Surprise surprise, employees lose out again. But I guess they were already in danger of getting nothing if this is the deal management struck.

The glassdoor reviews seem to universally complain about poor stock compensation, so it seems they weren't getting much to start with.

That is likely more to do with them being Swedish I suspect.

Stock compensation is a lot less competitive here due to it being taxed as normal income for the most part. Not to mention salaries being a lot lower in general than USA or some other parts of Europe.

Ya - sucks. I said this in a comment below, but also relevant here: capital > labor

Well, in this particular case employees wanted to play the capital game. It's not a nice game it seems.

That says it all really.

Management and early employee incentives are rarely aligned.

Would it not be possible for an employee to hedge/short-sell the stock using i.e an option?

Mark Cuban did this when selling broadcast.com to Yahoo. It's a pretty amazing hedge: http://investmentxyz.blogspot.com/2006/05/cubans-collar-anat...

I'm not familiar with Spotify's terms with employees, but it's not uncommon for this to be expressly forbidden in the stock option / Rsu grant agreement.

They could perhaps buy call options against their direct competitors (Apple and Pandora, even though the latter is doing terribly) in the event that the IPO goes poorly, but that would essentially require that Spotify losses be countered by gains in the competitors, which is of course not a guarantee.

Basically: they're kinda fucked if it goes south.

Spotify isn't listed so any form of derivative contract is not standardized and is thus subject to liquidity and counterparty risks.

These terms remind me of penny stock toxic financing schemes.

I look forward to the inevitable pump and dump around IPO time.

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