Believe Founder and Investment Firms Plan to Take Digital Music Company Private
Believe, the digital music company that made waves with its unique approach to the streaming era, is set to go private. Denis Ladegaillerie, the founder and CEO of Believe, has joined forces with private equity firms EQT and TCV to offer €15 in cash per share to outstanding shareholders. This deal values the company at approximately €1.52 billion, representing a 21% premium to Friday’s closing price.
Believe, founded in 2005, positioned itself as a revolutionary music label for independent artists seeking to maximize their earnings on streaming platforms and gain international visibility. Its initial public offering in 2021 aimed to tap into investors’ growing interest in the music sector, which experienced a resurgence thanks to the popularity of platforms like Spotify and Apple Music. However, Believe’s unconventional business model and competition from traditional labels have made investors cautious, resulting in the share price trading around 30% below the IPO price.
While Believe generates most of its revenue from its premium service for established artists, it differentiates itself from traditional labels by allowing musicians to retain control over their copyright and paying Believe a share of the revenue. Ladegaillerie expressed his disappointment with the share price evolution, stating, “Since being a public company, Believe has systematically outperformed its objectives, delivering its IPO plan two years ahead of schedule.”
To facilitate the privatization process, Ladegaillerie and the private equity firms have already secured agreements to acquire 72% of Believe’s share capital from existing shareholders. They also have the support of additional shareholders representing 3% of the share capital who are willing to tender their shares at the offer price.
The consortium plans to file the tender offer in the second quarter, pending approval from regulators and Believe’s board, which has expressed its support for the offer. If they manage to secure backing from holders of 90% of the share capital, the consortium will have the authority to buy out remaining shareholders and delist the company from the public market.
Believe operates in 50 countries, collaborating with approximately 1.3 million independent musicians and various music labels to enhance their presence on social media and streaming platforms. With partnerships with over 150 streaming providers, including Spotify, YouTube, Apple Music, and Amazon, Believe has established itself as a key player in the music industry.
While Believe’s revenue has experienced steady growth, operating expenses have also increased, resulting in the company operating at a loss of €22 million in 2022. However, industry experts, such as Goldman Sachs, project that the total music streaming market will generate revenues of around $38 billion in 2023.
Believe’s decision to go private reflects the challenges faced by digital music companies in a highly competitive landscape. By teaming up with private equity firms, Ladegaillerie aims to regain control over the company’s direction and unlock its full potential away from the scrutiny of public markets. As the music industry continues to evolve, it remains to be seen how Believe’s privatization will impact its ability to support independent artists and drive innovation in the streaming era.