The value of Spotify's stake in Tencent Music nearly double when the Chinese music streamer went public on the New York Stock Exchange last week. Spotify's windfall could top $1.5 billion and make the company profitable in Q4. Spotify stock closed at $120.47 Monday, a post-IPO low.
In December 2017, Spotify received over 8.5 million shares valued at about $1 billion as part of a stock swap with Chinese streamer Tencent Music. When Tencent delayed its IPO last quarter, an F-1 Registration Statement revalued Spotify's Tencent investment to $6.52 per share for a total of $1.8 billion.
Then Tencent shares debuted at $13 last last week, nearly doubling the Q3 $6.52 per share price estimate.
Tencent Music was trading in the $12.13 range as part of an overall market downturn Monday. Even at that price compared to Q3's $6.52 estimate, the post IPO value of Spotify's stake in Tencent has risen 86% to to $3.35 billion, or a $1.55 billion windfall for Spotify.
Spotify had earlier predicted that could turn the company profitable, even if just for a single quarter:
"The accounting treatment for such a gain could trigger a tax benefit large enough to generate positive Net Income for us in the quarter of the IPO. If such an outcome were to occur, it would be a one-time, non-recurring event. The following quarters we would expect the business to once again generate a Net Loss."