Universal Music to sell half its Spotify stake for buybacks, Q1 hit by weak dollar
Universal Music Group's Strategic Moves and Financial Performance
By Leo Marchandon
Stake Sale and Share Buyback Programme
April 29 - Universal Music Group said on Wednesday it would sell half of its equity stake in Spotify and double its share buyback programme, as it reported first-quarter revenue held back by a weaker U.S. dollar.
UMG said proceeds from the stake reduction would be used for the buyback and also shared with artists.
Context: Activist Investor Pressure
The move comes three weeks after activist investor Bill Ackman made an unsolicited $64 billion bid for UMG, arguing the market was not fully valuing its 2.7-billion-euro Spotify stake. Ackman proposed selling the holding and using 1.5 billion euros of the proceeds as part of the takeover's cash consideration.
UMG Board's Independent Decision
UMG's board has now moved independently, approving a sale on its own terms rather than returning the proceeds directly to shareholders, as Ackman had advocated.
Artist Compensation and "Taylor Swift Clause"
The decision allows UMG to honour its "Taylor Swift clause" - a commitment made in 2018 when the pop star re-signed with the label on the condition that any proceeds from a Spotify stake sale would be shared with all artists on a non-recoupable basis.
Financial Results for Q1
Share Buyback Expansion
UMG said it also planned to launch an additional 500-million-euro share buyback, subject to shareholder approval at its annual general meeting, doubling its total buyback authorisation.
The board said it views the shares as undervalued relative to the company’s performance and prospects.
Revenue and Earnings Overview
First-quarter revenue came in at 2.9 billion euros ($3.4 billion), flat year-on-year in reported terms but up 8.1% in constant currency.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 3.8% to 636 million euros, but rose 3.9% in constant currency.
Top Sellers and Market Impact
Top sellers in the quarter included BTS, Taylor Swift, Olivia Dean, Morgan Wallen and the K-Pop Demon Hunters soundtrack, the company said.
($1 = 0.8547 euros)
(Reporting by Leo Marchandon in Gdansk. Editing by Matt Scuffham and Mark Potter)
