Deezer raises $109 million despite cancelling its IPO plan
Deezer, an online music streaming service that could potentially rival Spotify and other streaming services available at the moment just announces that it has raised $109 million. The company which had previously abandoned its plan to go public said that the money was raised from its two largest shareholders.
According to ABC News, Deezer's investment was obtained from the Access Industries and Orange, one of the biggest telecom company in French. Albrecht also said that the new investment will help Deezer to be able to utilize its new partnership with the phone carrier to grow its users internationally.
The Paris-based company abandoned its IPO plan after careful evaluation regarding the current economic situation. Its CEO, Hans-Holger Albrecht said as cited by Fortune that "With the global uncertainties of the current market, we felt it would be smarter to postpone our IPO and raise private money instead. This round of funding gives us more options, one of which is to go public."
According to the estimation, Deezer's initial plan is to raise $400 million through the IPO which would value the company at around $1.1 billion. The music streaming company was planning to sell 30 percent of its stake through the IPO but halted the plan just a few week before its scheduled listing date.
With six million active subscribers, Deezer is still a long way to rival Swedish-based company, Spotify which is currently evaluated at $8.53 billion with 20 million paying users. Its closest rival, Apple music had just also announced that they recorded a total of 10 million subscribers by the end of last year.
The Wall Street Journal reported that Deezer abandoned its plan after seeing other streaming service's shares plunging down last year. Among the worst performer is Pandora Media Inc. shares. The company's shares plunge down 35 percent after the company released a statement showing its massive settlement with record labels.
Besides that, video streaming company, Netflix also saw its shares plunge 10 percent after a lower than expected third-quarter earnings.
Deezer is also currently facing some problem in its deal with the telecom carriers as only 3.8 million of its users are generating recurring revenue while other users are only using a prepaid upfront.
However, with lots of investment coming directly from Access Industries, the company that also owns the Warner Music Group, Deezer can expect to make full use of the latest partnership. Deezer is expected to announce more new products in the future to attract more subscribers.