Spotify & Tencent in talks about stock swap deal

Spotify and Tencent’s music subsidiary are in talks to swap stock with each other ahead of going public next year, according to a report by the Wall Street Journal. The paper reported Friday that the two companies are considering trading stakes of up to 10% with each other.

The Journal reported on Friday that Tencent Music was valued at around $6 billion last year, and could be valued as much as $10 billion now. Spotify was valued $9.5 billion in 2015, and could be valued as much as $20 billion by the time it goes public.

This mean the stock swap could come with an important cash bonus for Spotify and open a door to China. Spotify is currently not operating in China, and has yet to raise significant capital from Chinese investors.

Tencent’s music subsidiary is operating multiple music streaming services in China, which altogether have 700 million monthly active users. However, only a small fraction of those users is said to pay for music streaming, and the Journal reported Friday that Tencent’s licenses with the western majors have proven to be expensive. Teaming up with Spotify could potentially help the company to get better deals, as well as improve its conversion rates.