Michelle ThompsonAfter the music streaming service said it was firing nearly a fifth of its staff, the price of its shares shot upward.
After Spotify revealed it was cutting off nearly a fifth of its personnel to save expenses, the value of the largest music streaming business in the world increased, and one of its top executives profited more than $9 million (£7.2 million) in shares.
On Tuesday, a day after investors sent Spotify’s share price skyrocketing in reaction to rumors that the cuts would help the company sustain profitability amid slowing economic growth, Paul Vogel, the company’s chief financial officer, sought to sell the $9.4 million worth of stock.
Not just Vogel profited from the jump, though. The day of the announcement saw an 8% increase in Spotify’s share price, which has continued to rise. More than $1.6 million in shares have been cashed in by two other top officials, as per documents filed with the US Securities and Exchange.
Spotify was trading at $180 per share on Friday, the final trading day before the firm revealed it was going to lay off 1,500 employees. It shot up to $194 on Monday, the day the layoffs were announced, and then to $199 on Tuesday, when Vogel’s sale of 47,859 shares was revealed in the SEC filing.
The share price surge has been sustained by investors; on Wednesday, it reached a 52-week high of $202.88 during trade, valuing the Stockholm-based company at $37.9 billion.
It’s perfectly legal to sell stock just after a wave of layoffs, but it may not look good to try to profit from a spike in share prices while many employees are facing layoffs around Christmas.
“Our cost structure for where we need to be is too big, despite our efforts to reduce costs this past year,” CEO and founder of Spotify Daniel Ek stated in a blog post on Monday announcing the changes.
“I understand that this will have an effect on several people who have made significant contributions. To put it bluntly, a lot of intelligent, gifted, and diligent individuals will be leaving us.
In January, Spotify reduced its global staff to 9,200 employees by 6%. Four months later, the company slashed 200 more workers, primarily in its podcasting segment.
Despite increasing its monthly active users to 574 million in the third quarter, the company has failed to turn a profit and recorded a net loss of around $500 million for the nine months ending in September.
It has also had trouble turning a profit on its costly venture into podcasting, which expanded beyond music. By mutual consent, the corporation and the media group led by Prince Harry and his wife, Meghan, the Duchess of Sussex, discontinued their multimillion-dollar partnership in June.
The couple signed the deal in 2020 for an alleged $20 million (£15.6 million or A$29.1 million), but they only produced one series under their Archewell Audio podcast banner.
