Earlier, Digital Music News announced that the beleaguered streaming service was receiving rescue investment from two groups. But according to a just-released report, those current investors need to be supported by a bunch of older investors. And that’s not guaranteed.
The vote to rescue (or not) begins on Friday, August 11th, according to Axios writer Dan Primack. Citing a record leaked to Axios, Primak notes that the incoming ‘rescue’ investors Raine Group and Temasek would gain special treatment. Which basically suggests that other investors would be deprioritized, get worsened terms, and have a difficult time recovering their cash.
Ljung has suggested that if the rescue package isn’t passed, the group won’t have enough money to survive. It would start a serious tailspin as employees hopped ship and the money decreased to zero.
So basically, a ‘no’ vote ends the company. Or at least drastically reduces its chances of survival.
Existing investors would face unusual raw deal terms. In the case of an inevitable fire-sale or liquidation, Raine and Temasek would get to grow their funds first, on with any other investors playing in this ‘Series F’. Sounds like a serious deal, except that the option is destroying SoundCloud forever.
SoundCloud is requesting for an additional $170 million. The Series F sharply plunges SoundCloud’s pre-money valuation to $150 million.
One option for existing investors is to keep the company afloat and accept the bad terms. Then, work like hell to either liquidate or sell the company, a movement that Ljung has previously resisted.
Others investors playing in this ‘Series F’ round incorporate Union Square Ventures, Doughty Hanson and Atlantic Technology. So that involves the analysis and decision matrix a bit.
Existing SoundCloud CEO Alex Ljung is clearly urging investors to vote yes. But here’s the kicker: News has just announced that if the rescue round is approved, Ljung will probably be fired. In fact, a massive management shakeup is almost a certainty.
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