Valuation of Spotify using Selected Valuation Methods

Nandan Damini

Master's thesis

Valuation of the Selected Company using Selected Valuation Methods

Abstract:

This thesis aims to determine the valuation of Spotify Technology S.A., which is publicly traded on the New York Stock Exchange. Employing a bifurcated approach, this work integrates a theoretical examination of established business valuation methodologies with their practical application to Spotify. The theoretical segment critically reviews the literature on business valuation, highlighting predominant techniques. In the practical segment, the thesis applies the Discounted Cash Flow (DCF) and Option Pricing models to derive Spotify's Enterprise Value, while also supplementing this valuation with the Economic Value Added (EVA) method, which provides insights into economic profit beyond capital costs. A unique aspect of this study is its consideration of the influence of Generation Z's preference for digital art over traditional media, assessing how this shift affects Spotify's strategic positioning and valuation. The research concludes with a comparative analysis of the valuation methods used, offering strategic recommendations for Spotify's management and insights for stakeholders such as investors, creditors, public institutions, and prospective employees. This comprehensive valuation is intended to support informed decision-making and strategic planning within Spotify and by those associated with the company.

Abstract:

This thesis aims to determine the valuation of Spotify Technology S.A., which is publicly traded on the New York Stock Exchange. Employing a bifurcated approach, this work integrates a theoretical examination of established business valuation methodologies with their practical application to Spotify. The theoretical segment critically reviews the literature on business valuation, highlighting predominant techniques. In the practical segment, the thesis applies the Discounted Cash Flow (DCF) and Option Pricing models to derive Spotify's Enterprise Value, while also supplementing this valuation with the Economic Value Added (EVA) method, which provides insights into economic profit beyond capital costs. A unique aspect of this study is its consideration of the influence of Generation Z's preference for digital art over traditional media, assessing how this shift affects Spotify's strategic positioning and valuation. The research concludes with a comparative analysis of the valuation methods used, offering strategic recommendations for Spotify's management and insights for stakeholders such as investors, creditors, public institutions, and prospective employees. This comprehensive valuation is intended to support informed decision-making and strategic planning within Spotify and by those associated with the company.

Keywords

Klíčová slova, Spotify Technology S.A., Diskontované Peněžní Toku (DCF), Option Pricing model, Enterprise Value, Hodnota podniku, Economic Value Added (EVA), Ekonomická přidaná hodnota (EVA), Option Pricing Model.

Language used: English

Date on which the thesis was submitted / produced: 19. 4. 2024

Thesis defence

• Supervisor: prof. Dr. Ing. Drahomíra Pavelková

Tomas Bata University in Zlín

Faculty of Management and Economics

Master programme / field:
Finance / Financial Markets and Technologies