Spotify has announced plans to buy back $1bn worth of its stock, or approximately 10 million ordinary shares. The decision was reached by its shareholders during a general meeting and announced following its authorization by Spotify's board of directors. The buy-back program will run until April 21, 2021.
The decision to buy back Spotify's shares appears to be in an effort to mediate the effects of growing skepticism regarding the company's future growth potential by investors and the macro trend of declining share prices sweeping the tech field, which has affected companies such as Facebook and Amazon.
Spotify hit its lowest share price since it went public this October, venturing below its market cap of $26bn for the first time to close at $25.1bn. This was despite meeting most of its financial targets, raking in $1.5bn in revenue and increasing its user base by 40% to 180 million users this year alone.
Along with uncertainty in the market, the company also faces increased competition from a newly focused Apple Music. The tech giant recently bought a music analytics startup called Asaii in an effort to sure-up its recommendation engine. YouTube also launched YouTube Music this year and has been aggressively leveraging the familiarity of its brand to bring in new customers.
However, Spotify still has the largest number of paid subscribers for a music streaming service and are still only available in a handful of countries: the US, UK, Canada and Australia. This means the company still has significant potential to grow in coming years.
In a statement, Spotify explained: "The repurchase program will be executed consistent with the company's capital allocation strategy of prioritizing investment to grow the business over the long-term."
It further added that the program could be "suspended or discontinued at any time at the company’s discretion".