After Deezer Failed to Go Public Years Ago, Now Timing Is Everything

Since 2020, nine music-related companies — including the first- and third-largest record labels — have gone public to take advantage of renewed investor interest in a once-struggling industry. Add French music streaming service Deezer to the list.

According to a report on Wednesday at The Wall Street Journal, Deezer, which first attempted an initial public offering in late 2015, is planning to go public with a European special purpose acquisition corporation, I2PO, backed by Groupe Artémis, a holding company behind fashion brand Puma and French investment banker Matthieu Pigasse, a partner at Paris-based Centerview Partners. Deezer had no comment to Billboard on the news. Representatives for I2PO did not respond to a request for comment.

Deezer — led since last year by CEO Jeronimo Folgueira —  is relatively small by global standards, owning a roughly 2% share of the music subscription market in the second quarter of 2021, according to MIDiA Research, which works out to about 10.5 million subscribers. When it received a $40 million investment in July 2020, Deezer claimed a valuation of $1.4 billion — a fair figure for a SPAC target. But today’s music streaming market is dominated by global tech giants with greater resources. Spotify, which currently has a market capitalization of roughly $26 billion, has 180 million subscribers and 236 million ad-supported listeners monthly. Apple Music, Amazon Music and YouTube Music have also built the global market by leveraging their ubiquity in hardware, software and e-commerce.

Deezer previously attempted to list on the Paris exchange in 2015 but abandoned the plan for a 300-million euros ($344 million) IPO amidst a dark outlook for streaming services. The news of recently-launched Apple Music’s momentum and a resulting slowdown in Pandora’s user growth — and a 36% drop in its share price — had a chilling effect. Then, Deezer had 6.3 million subscribers — although 40% came from partnerships with mobile carriers partnerships that did not generate any revenue. Today, services can rely more on self-pay subscribers and rely less on money-losing promotions. “It’s better for us to wait a bit,” Didier Bench, chairman of Deezer’s board, told The Wall Street Journal at the time.

Now, there may be no better time for Deezer’s investors, which include Access Industries, Warner Music Group’s majority owner, to cash out. SPACs — blank-check, shell companies that get funded before finding acquisition candidates — typically have 18 months to finalize a merger before returning investors’ money. That adds pressure to find an acquisition target. But a SPAC interested in music has limited options for companies with a track record, strong management and multi-billion-dollar valuations. Of the 609 SPACs currently seeking an acquisitions, according to SPAC Analytics, at least two are targeting music specifically: Liberty Media Acquisition Corporation and Music Acquisition Corporation, the latter headed by former Geffen Records president Neil Jacobson.

Two other music companies have gone public through SPACs since the investment vehicles exploded in popularity in 2020. Abu Dhabi-based music streaming service Anghami merged with Vistas Media Acquisition Company in March 2021, becoming the first Arab tech company listed on the Nasdaq. Anghami is even smaller than Deezer: It had 18.4 million active users and 1.4 million subscribers in 16 markets as of 2020, with preliminary 2021 revenue between $35.1 million and $36.1 million, according to a January 2022 investor presentation. Reservoir Media, a New York-based publisher and record label, merged with Roth CH Acquisition II Co. in July 2021.

I2PO raised 275 million euros ($300 million) in an initial public offering on the Paris Euronext exchange on July 20, 2021. The company eyed a technology platform in music, electronic games, leisure or online learning. “There is a real opportunity in Europe to create a worldwide leader in the entertainment and leisure sector,” said Iris Knobloch, a former WarnerMedia executive and I2PO’s president of the executive board and director general, when the company debuted.

Although merger news usually moves a SPAC’s share price, I2PO shares rose only 0.10 euros to 9.90 euros on Wednesday and were unchanged on Thursday. I2PO shares have never exceeded their 10.00 euros IPO price and reached a low of 9.22 euros on Aug. 6, 2021.

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