From: Richard Kahn

Sent: Monday, March 5, 2018 6:01 PM To: Jeffrey E. Subject: Fwd: BAML Spotify Cheat Sheet

Richard Kahn
HBRK Associates Inc.
575 =exington Avenue 4th Floor
New York, NY 10022
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Begin forwarded message:

From: =/b>Paul Barrett <████████████████████████████

Subject: =/b>Fwd: BAML Spotify =heat Sheet

Date: March 5, 2018 at 12:49:37 PM EST

To: =/b>Richard Kahn <████████████████████████

Paul Barrett

Alpha Group Capital LLC

<x-apple-data-detectors://0/1> 142 = 57 <x-apple-data-detectors://0/1> th Floor, New York, NY 10019 <x-a th <x-apple-data-detectors://0/1> le-data-detectors://0/1> Street, 11

(o) (c)

Begin forwarded message:

From: "Ens, Amanda" <██████████████████████████
Date: March 5, 2018 at 12:42:49 =M EST

To: "Paul Barrett"
Subject: BAML Spotify =heat Sheet
Reply-To: "Ens, Amanda"

Trading Commentary (Not a =roduct of BAML Research and should not viewed as a research report)

## Monday, March 5th, 2018

Timeline (Tentative)

- March 15: Analyst Day - Official =isting/Trading Date likely given

Week of March 19: Company =ponsored "Investor Education" meetings & likely =esearch coverage launches by Sell

## Side

- Week of March 26: Trading Begins - =dvisors work with Spotify to set initial trade price

- April 2 (Tentative): Options =rade

## Financials - Fl =iling now =ublicly available

2017 =evs: $5B & Positive FCF =133M — 5.6x trailing revs certainly possible, implying $25B+ =aluation (Vivendi — not clean comp sells at 2.2x current yr =evs).

Ordinary Shares Outstanding: Working on syncing our =hares outstanding number with what is reported in the F-1.

## Source: SEC.gov, F-1filing -

https://www.sec.gov/Archives/edgar/data/1639920/000119312518063=34/d494294df1.htm#rom494294_18

## Historical Private Share Trading

	- 2017: $37.50 to $125

• 1/1/18 to 2/22/18: $90 to $132.50 =excl Tencent transaction)

o At high end of recent trading, =mplies mkt cap $268+ (very rough estimate).

## Bull/Bear Views

• Bull Argument for =tock to go $30B+. The model is not =etflix, it's like EBay or GrubHub. Company isn't =bout owning content — they're just taking a chunk of =he subscription for all the music you want anytime you want. Pushback will be =hen multiple should be on gross profit not revenue — we'l= see

• Bear =rgument. If it's =etflix, then Spotify's lack of performer exclusivity is a =roblem — long term strategy for Spotify likely to be paying up =or performer exclusivity (good) but likely results in higher than =xpected cash burn (bad).

• Competition = Apple's U.S. user =ase may exceed Spotify's by this summer. Spotify at 70M =ubscribers, growing at 2%/month vs Apple at 36M subscribers, growing at =%/month.

## Expected Trading Dynamics

Our understanding is that on the =orning of trading, the Floor Specialist will act like a stabilizing =gent (with MS advising) normally would to help match supply and =emand.

- The opening is likely to be very =elayed as we will not know amount of shares to be bought/sold.

The stock has a decent probability =f trading up significantly on day 1 due to lack of pressure from =elling shareholders.

## Other=tidbits

• No deal roadshow, No =nderwriters

• No fixed # of securities for =ale

## Other=tidbits (cont.)

No lock-ups except Tencent Music =ntertainment & Tencent (holding for at least 3 yrs), who own =7.5% Majority Ownership by Founders - =aniel Elk controls 37.3% of shares and Martin Lorentzon controls 43.1% =f shares

• There is language about =eneficiary shares that may be issued to founders on top of shares, but =ould be dilutive and likely to maintain control if/when company does =uture capital-raising

Source: SEC.gov <http://sec.gov/>, F-1 filing = https://www.sec.gov/Archives/edgar/data/1639920/000119312518063=34/d494294df1.htm#rom494294_18

Funding Rounds

Source: Crunch =ase - https://www.crunchbase.com/organization/spotify#section-locked-=arketplace

Trading Commentary (Not a =roduct of BAML Research and should not viewed as a research =eport) This material was =repared by Trading personnel of Merrill Lynch and is subject to the =erms available at the following link: http://corp.bankofamerica.com/business/smb/landing/emaildisclai=er/americas/global-markets

This material was =repared by Cash Equity Trading of Merrill Lynch, Pierce, Fenner & =mith, Incorporated ("ML"). The material is not a publication of BofA =errill Lynch Global Research, and it has not been reviewed or approved =y BofA Merrill Lynch Global Research. Any summary of ML Research notes =nd reports, and/or any reference or link to BofA Merrill Lynch Global =esearch notes and reports, are qualified in their entirety by the views =f BofA Merrill Lynch Global Research. Any reference to or summary of ML =esearch in this material is qualified in its entirety by the views of =ofA Merrill Lynch Global Research. Please refer to BofA Merrill Lynch =lobal Research for more details (baml.com/markets <http://www.baml.com/markets> ).

The estimated values provided =n the material are "as of" the date indicated and do not represent =ctual bids or offers by ML. Even though the material is based upon =ublicly available information and news sources that are generally =elieved to be reliable, there can be no assurance that actual trades =ould be completed at such value(s). Because these estimated valuations =re based on underlying valuations obtained from third party sources we =annot make any representation as to the accuracy or completeness of the =aluations. The material is not intended to be a comprehensive summary =f all material news, information, events and risks relating to the =ompanies or securities mentioned. ML does not make any representation =r warranty as to the accuracy or completeness of this material, and, by =ccepting the material, you agree that ML shall not be responsible for =ny error or omission. References to past prices or quotes do not in any =ay imply that such prices or quotes will again be available or =ctionable. These estimates may not be representative of any theoretical =r actual internal valuations employed by us for our own purposes, may =ary during the course of any particular day and may vary significantly =rom the estimates or quotations that would be given by another =ealer.

This material does not =onstitute an offer, or a solicitation of an offer, to purchase or sell =ny security or financial instrument, nor does the material constitute =dvice or an expression of ML's view as to whether a particular security =r financial instrument is appropriate for you and meets your financial =bjectives. ML will not be liable for any investment decision based in =hole or in part on the material. The reader is required to make its own =nvestment decisions, using as necessary the advice of independent =dvisors or consultants. As a condition for providing these estimates, =ou agree that Merrill Lynch makes no representation and shall have no =iability in any way arising there from to you or any other entity for =ny loss or damage, direct or indirect, arising from the use of this =nformation. ML and its affiliates may trade for their own accounts as =arket maker, block positioner, dealer, specialist, arbitrageur or =peculator in any of the securities of issuers mentioned in this =aterial. When trading for proprietary accounts, ML and its affiliates =ay consider the material in their trading decisions, as appropriate. =rincipal transactions by ML and its affiliates are effected in

## Other=tidbits (cont.)

=ccordance with applicable rules and regulations, and such transactions =ay affect the prices of the securities mentioned. Further, ML and its =ffiliates may from time-to-time perform investment banking or other =ervices for, or solicit investment banking or other business from, any =ompany mentioned in the material. This material may not be distributed =utside the United States; and is intended solely for Global Markets =nstitutional clients. The material is provided for informational =urposes only and any distribution or copying of the material is =rohibited.

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