EFTA00866819.pdf

From: David Fiszcl •ifi• To: jeffrey E. <jeevacation®gmail.com> Subject: Re: BAML Spotify Cheat Sheet - UPDATE Date: Thu, 08 Mar 2018 00:35:18 +0000 I don't remember off the top ofmy head when you came in but still buying here a lot. guessing you are in around $80 and I expect it to go Public around $125 with a $200 Target by end of 2019. On Mar 7. 2018, at 7:28 PM, jeffrey E. .chsvacation(dgmail.cota> wrote: What price arc we in and what do expect the ipo price On Wed, Mar 7, 2018 at 7:17 PM David Fiszel •;:a. wrote: Means zero. They aren't involved. Analyst day will be March 15 and I think it will be a lovefest. Morgan, GS and Allen&Co arc the advisors. On Mar 7, 2018, at 6:27 PM, jeffrey E. <jcsvacationqgmail.com> wrote: what does this mean to us Forwarded mesae From: Richard Kahn Date: Wed, Mar 7, 2018 at 4:29 PM Subject: Fwd: BAML Spotify Cheat Sheet - UPDATE To: "jeffrey E." <jurvocationftmarlsom> Richard Kahn HBRK Associates Inc. 575 Lexington Avenue 4th Floor New York NY 1001/ tel fax ccl Begin forwarded message: From: "Ens. Amanda" •t in Subject: BAML Spotlfy Cheat Sheet - UPDATE Date: March 7.2018 at 2:09:53 PM EST To: "rkahn' Reply-To: "Ens. Amanda <imageooLpng> ;mom Commentary (Not o product of MAU Research and should not bawdai a research report) Seedily: Stockbolm-based musk streaming service Timeline • Mardi 15: Analyst Day (confirmed - Uvestream)- Official usting/ttading Date likely given • Week of March 19 (Tentative): Company sponsored 'Investor Education* meetings & potential Research coverage launches by Sell side • Week of March 26 (Tentative): Trading Begins. Advisors work with Specify to set initial trade price • April 2 (Tentative): Options Trade Financials - 1 filing now pubicly available 2017 Revs: $58 & Positive FCF $133M - 36x trailing revs certainly possible, implying 5258+ valuation lin our SOTP for Vivendi we have musk at as sales or €24bn) Ordinary Shares Outstanding: 176,976,280 reported as of 2/22/18 Valuation: At high end of recent trading, Implies mkt cap $268+ Miry rough estimate). However, using current secondary market pikes (`$125) Implies a market cap of - $228 (very rough estimate) o Client conversations point to a $20-228 valuation as being a level they might add eimage002.png> Smut: F-1Mn{-hana ,.auwws=stdmoteeir an.' INW4Kgn NII 41.X.141.1 4444NNdiI hin.ftlin4,11, 4. 1• EFTA00866819 Industry Model: Record Labels own New Music & Back Catalog— Distribute thru Sootily & Apple Musk to Consumers — key question is how does Sootily gain control over supply? Bull/Bear Views • Bull o Sootily becomes the Netffix of music by becoming a record label owning exclusive content— not the case today and likely cash Intensive o Sootily Is an aggregator (not Netflix), It's taking a commission on providing all musk any time you want — pushback likely would be then should be valued on gross profit multiple • Bear o Cash burn/ Potential dilution rises higher than expected as company pivots to become Netflix of music - paying up for performer exclusivity (good) but likely results In higher than expected cash burn (bad) o Typical consumer model Is advertising — give service away for free and get 31d party advertisers to pay for access to users. Typical business model Is Saa5 — subscription fee. Key for both is marginal cost to add users is minimal. Due to royalty agreements, marginal costs for Sootily grow with user growth limiting operating leverage from network effect (similar to Lyft/Uber/Altbnb) • Competition - Apple Music - Record labels Index Implications In order to be included in the 5&P SCO, a company must have been trading for at least 12 months following an IPO as well have positive earnings. As a result, we don't expect any index implications for SPOT in the 5&P 500 until these requirements are met. However, it should be eligible for the S&P TMI and Completion Indices. We are still looking at Implications for FTSE and MSCI based on domicile. Stock Loan Implications Given the structure of the IPO, there may be a delay in shares settling INTO stock lending programs due to the 0WAC process. elivery Withdrawal at Custodian). This potential delay will more than likelyaffect the Initial Locate Liquidity for a few days. Happy to coordinate calls with John Epan, BMOCs Short ArlOiyikS Specialist Expected Trading Dynamics • Our understanding is that on the morning of trading, the Floor Specialist will act Gke a stabilizing agent normally would (with banks advising) to help match supply and demand • The opening is likely to be very delayed as we will not know amount of shares to be bought/sold • The stock has a decent probability of trading up significantly on day 1due to lack of pressure from selling shareholders & inability to source a locate Historical Private Share Trading • 2017:$37.50t03125 • 1/1/18 to 2/22/1& $90 to $132.50 (excl 'reticent transaction) Some confusion on share pikes as secondary market pekes are currently —$5000/shore. Everything in prospectus reflects a 40-to-one shore split (this Includes the beneficiary certificates that the founders own) clinageO03.png> SOUIe:ILLDL,F1Meg .taipan. ArChT•rce4ig, chla Ihl't)W{p,l NII'w1MM.g dNlViolin a. 1, 31 I k Other tidbits • No deal roadshow, No underwriters • No fixed a of securities for sale • No lock-ups except Tencent Music Entertainment & Tencent (holding for at least 3 yrs from 12/15/17), who own -7.5% • MajorityOwnership by Founders- Daniel Elk controls 37.3% of shares and Martin Lorentzen controls 43.1% of the vote. Both founders control 21% of the ordinary shares outstanding • There is language about beneficiary shares that may be issued to founders on top of shares, but would be dilutive and likely to maintain control if/when company does future capital-raising cimage004.png> sound: SI ( *.w‘b,F-1Meg • la:it• nip dmhi,uNps aiu l(494200)01IIII25IPIA.I41-144.ISAMII I4A,,,AienI94294 IA Have received a lot of requests for conference calls & happy to organize calls for those interested. Thanks, Alll, Alkesh & Mike Trading Commentary (Not a product of BAML Research and should not viewed as a research report) This methane, was prepared by Trading personnel of Mame Lynch end is subject to the terms available at the folibwkig fink This material was prepared bytash Equity Trading of Merrill Lynch, Pierce, Fenner & Smith, Incorporated PAO. The material is not a publication of BolA Merrill Lynch Global Research, and it has not been reviewed or approved by BolA Merrill Lynch Global Research. Any summary of ML Research notes and reports, and/or any reference or link to BolA Merrill Lynch Global Research notes and reports, are qualified in their entirety by the views of BolA Merrill Lynch Global Research. Any reference to or summary of ML Research in this material Is qualified in its entirety by the views of BolA Merrill Lynch Global Research. Please refer to BotA Merrill Lynch Global Research for more details The estimated values provided in the material areas of" the date indicated and do not represent actual bids or offers by ML. Even though the material is based upon publicly available information and news sources that are generally believed to be reliable, there can be no assurance that actual trades could be completed at such value(s). Because these estimated valuations are based on underlying valuations obtained from third party sources we cannot make any representation as to the accuracy or completeness of the valuations. The material is not intended to be a comprehensive summary of all material news, information, events and risks relating to the companies or securities mentioned. ML does not make any representation or warranty as to the accuracy or completeness of this material, and, by accepting the material, you agree that ML shall not be responsible for any error or omission. References to past prices or quotes do not in any way imply that such prices or quotes will again be available or actionable. These estimates may not be representative of any theoretical or actual internal valuations employed by us for our own purposes, may vary during the course of any particular day and may vary significantly from the estimates or quotations that would be given by another dealer. This material does not constitute an offer, or a solicitation of an offer, to purchase or sell any security or financial Instrument, nor does the material constitute advice or an expression of ML's view as to whether a particular security or financial instrument Is appropriate for you and meets your financial objectives. ML will not be liable for any Investment decision based in whole or In part on the material. The reader is required to make its own investment decisions, using as necessary the advice of Independent advisors or consultants. As a condition for providing these estimates, you agree that Merrill Lynch makes no representation and shall have no liability in anyway arising there from to you or any other entity for any loss or damage, direct or Indirect, arising from the use of this information. ML and its affiliates may trade for their own accounts as market maker, block positioner, dealer, specialist, arbitrageur or speculator in any of the securities of issuers mentioned in this material. When trading for proprietary accounts, ML and its affiliates may consider the material in their trading decisions, as appropriate. Principal transactions by ML and its affiliates are effected in accordance with applicable rules and regulations, and such transactions may affect the prices of the securities mentioned. Further, ML and its affiliates may from time-to-time perform investment banking or other services for, or solicit investment banking or other business from, any company mentioned in the material. This material may not be distributed outside the United States; and is intended solely for Global Markets institutional clients. The material is provided for informational purposes only and any distribution or copying of the material is prohibited. EFTA00866820  Anion Wile Director I US cash Equities 'Wading One Bryant Park 15th Fleet I Nen Yak NY 10036 Mewl Di this message. and ant attachments, is let them:y.40d reopientIst only. may contain information that n privileged, confidential and/or proprietary and whim' to important terms and conditions wadable at If you are not the intended recipient. aka50 date the message. <image001.png><image002.pngximage003.pngximage004.png> please note The information contained in this communication is confidential, may be attorney-client privileged. may constitute inside information, and is intended only for the use of the addressee. It is the property of JEE Unauthorized use, disclosure or copying of this communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in error. please notify us immediately by return e-mail or by e-mail to jervaratioa@gmail ram, and destroy this communication and all copies thereof, including all attachments. copyright -all rights reserved This e-mail and any transmitted with it may contain confidential and/or privileged information. Nothing contained in this e.rnail and/or any I transmitted with it constitutes a solicitation or an offer to buy or sell any securities. Use or disclosure of this e-mail or any such files by arryone other than a designated addressee is unauthorized. II you are not an intended recipient (or have received this email in error), please notify the sender immediately and delete this e-mail without making a copy. If this email is misdirected, Honeycomb Asset Management,. and its affiliates do not waive confidentiality or arty privilege. please note The information contained in this communication is confidential, may be attorney-client privileged, may constitute inside information, and is intended only for the use of the addressee. It is the property of JEE Unauthorized use, disclosure or copying of this communication or any part thereof is strictly prohibited and may be unlawful. If you have received this communication in crror, please notify us immediately by return e-mail or by e-mail to jrevaratiog(i4guaggrg, and destroy this communication and all copies thereof, including all attachments. copyright -all rights reserved This e-mail and any file(sl transmitted with it may contain confidential and/or privileged information. Nothing contained in this C.I114ii and/or any file(sl transmitted with it constitutes a solicitation or an offer to buy or sell any securities. Use or disclosure of this e-mail or any such files by anyone other than a designated addressee is unauthorized. If you are not an intended recipient for have received this email in error), please notify the sender immediately and delete this e-mail without making a copy. ll this e-mail is misdirected, Honeycomb Asset Management, and its affiliates do not waive confidentiality or arty privilege. In EFTA00866821