Soundcloud, the free music streaming service, is at a crossroads. Unless investors approve an investment plan to keep the company afloat by Friday, Soundcloud may quickly be out of cash.
Soundcloud shareholders are required to accept or reject a reorganization proposal by the end of Friday, according to an internal memo obtained by Axios.
The new investment, if accepted, will cost $169.5 million at a $150 million pre-money enterprise valuation.
Two new investors, Raine Group and Temasek, will join three existing investors with the proposal goes through. The new stock would dilute existing Series E investors by over 40 percent.
But rejecting the proposal may be the coup de grace for the Berlin-based company. CEO Alexander Ljung said in the memo that a rejection will not able “to continue as a going concern.”
A rejection may force Ljung to sell his company, which has earned a reputation as an independent haven for emerging musicians, to a larger company.
At its peak, SoundCloud was once valued at $700 million but has stumbled a long way down since. With the soaring popularity of subscription-based music streaming sites like Spotify and Apple Music, SoundCloud was squeezed out of the competition.
Last year, SoundCloud introduced its own subscription service called SoundCloud Go but it received mixed reviews and failed to take off.
In July, SoundCloud laid off 173 of its 420 employees and closed its London and San Francisco offices.
“We need to ensure our path to long-term, independent success,” wrote Ljung in a company blog post after the mass layoffs. “And in order to do this, it requires cost cutting, continued growth of our existing advertising and subscription revenue streams, and a relentless focus on our unique competitive advantage — artists and creators.”
Last that month, reports said the company had cash to make it until the fourth quarter of the year. Ljung publicly disputed the reports, promising artists and investors the company is here to stay.
“There’s an insane amount of noise about SoundCloud in the world right now. And it’s just that, noise,” Ljung said. “SoundCloud is not going away. Not in 50 days, not in 80 days or anytime in the foreseeable future. Your music is safe.”
Photo: Radiohead lead singer Thom Yorke performs at Outside Lands in Golden Gate Park in San Francisco, Calif., Friday, August 22, 2008. Outside Lands is the Bay Area’s largest music festival. (Alison Yin/The Oakland Tribune)
Tags: Apple Music, SoundCloud, spotify