It’s never a dull week at Utopia Music.
A few days ago, the Swiss-based music company confirmed that it was laying off around 15% of its global workforce, totaling approximately 100 jobs.
This news comes less than six months after a previous round of layoffs at the company in November, which saw 20% of its workforce – approximately 230 positions – eliminated.
Today, the company aims to increase USD €65 million ($72 million) through a new stock option program.
That’s according to a letter to Utopia shareholders Friday, April 21, obtained by MBW. The company says the new capital would fund its operations until it becomes profitable, which it expects to be in June 2024.
In total, Utopia says it seeks to raise €83 million ($91 million) of this new cycle of activities.
This includes the 65 million euros in new stock options, plus “up to a total of 25 million euroswhich has already been committed by the “first three shareholders of Utopia through conversions of their shareholder and convertible loans”.
(This €25 million figure, the company says, can reduce depending on how close it is, via the €65m to offer, to raise €83m in total.)
Existing shareholders receive an option for four shares they already own. Shareholders can then choose to convert these options into shares, for 10 € per share, before the expiration of the offer on May 5.
According to documents consulted by MBW, Utopia plans, via the options program, to dilute its current shareholding (33.11 million shares) with a maximum of 7.5 million new shares.
In the letter, Utopia Founder and Executive Chairman Mattias Hjelmsted disclosed that Utopia’s annual net revenues in 2022 amounted to 24 million euros on an adjusted pro forma basis (i.e. omitting revenue from recently divested assets such as Sentric).
Utopia, writes Hjelmsted, aims 41 million euros net income in 2023, i.e. growth of 71% from year to year.
“At the same time, we are improving our margins through scalable technology products, which will be an important aspect of our path to profitability,” he said.
Hjelmsted told shareholders that over the past few years, Utopia has “deployed a ‘hyper growth’ scaling strategy intended to take advantage of the then lucrative market that heavily rewarded growth, without focusing on immediate profitability.
He added that this strategy “was heavily dependent on new investments fueling this growth” and further asserted that, “midway through this process, the world changed dramatically and the financing environment became very sensitive to investments. growth-oriented (and not yet profitable) companies like Utopia”.
Hjelmsted continued, “While many companies continued to hope the world was better, we made some tough decisions and adapted.”
“We are currently arranging an internal fundraiser that reflects the support of our existing shareholders and will help propel the business further towards profitability.”
Utopia, in a statement to MBW
MBW contacted Utopia today (April 24) for a comment on plans to raise new capital through the new options program.
A spokesperson told us, “Utopia has already raised several successful funding rounds and we are grateful to have a strong shareholder base committed to the company and its future.
“We are currently arranging an internal fundraiser that reflects the support of our existing shareholders and will help propel the business further towards profitability.”
Utopia’s so-called “hyper-growth scaling strategy” saw the company embark on a wave of hiring and acquisitions in 2021 and early 2022.
Among the companies she bought during this time were Nashville-based financial services company Lyric Financial and Quincy Jones-backed emotional data enrichment company Musimap.
He also bought UK warehouse, fulfillment and distribution company Cinram Novum; Proper Music Group, a UK-based physical and digital music distributor; and Absolute Label Services, another UK-based distribution and service provider for independent artists and record labels.
In December 2021, it acquired US music industry directory ROSTR and Austria-based music data analytics platform ForTunes. In February last year, Utopia acquired Sentric Music Group, a music publisher and publishing administration company based in Liverpool.
These last two companies have since been sold by Utopia.
Believe bought Sentric from Utopia last month, just a year after Utopia itself acquired the company, while Utopia sold the music industry directory and data platform, ROSTR, to its founders in February.
Meanwhile, Utopia would be being for follow-up by US music technology company SourceAudio, which accuses Utopia of reneging on an agreed acquisition deal.
Commenting on the post-Sentric and ROSTR era at Utopia, Hjelmsted told shareholders on Friday that “Utopia’s new, more focused strategy will focus on the core of Utopia, which is the Utopia platform.”
He added, “Going forward, Utopia will focus on scalable, high-margin products that drive revenue and maximize shareholder value – as we have always intended.”
Commenting on the recent layoffs, he wrote: “We have reduced costs through two rounds of necessary right-sizing (20% in November 2022 and another 15% in April 2023), and we are now on the path to profitability and growth. sustainable growth. .
“Put simply: greater revenue streams at lower cost. To further strengthen our business, we made changes to our leadership team earlier this year to have people with more experience bringing products to market and building relationships with industry.
High-level executive departures at Utopia this year included the departure of the company’s longtime CEO, Markku Mäkeläinen, who left as part of a management reshuffle in January, which saw Hjelmstedt assume responsibility. day-to-day management of the business. .
Following the announcement of Sentric’s acquisition by Believe, we learned that former Downtown executive Roberto Neri, who joined Utopia as COO in 2021, and was named the new CEO of the ‘Music Services’ of Utopia in January left Utopia to become CEO. of Believe’s global publishing division.
Hjelmstedt told shareholders in last week’s letter that “according to the financial forecast made by the new management team, we now need additional funds before we reach profitability.”
“We have the products, we have the sales pipeline and we have the team. We have, in fact, done most of the work necessary to bring us to profitability. We now just need the necessary funding to carry out this plan.
He added: “Before turning to outside investors, we have decided to offer you, our shareholders, short-term free options which can be converted into shares at a price of €10 per share (valued at €50 in the pre-C round).
“With this approach, you benefit from the hard work we have put in over the past few months and reduce the risk associated with trying to raise funds through a round in an unstable market.”
Among Utopia’s products is its Track’n’Claim tool, which Hjelmstedt explained in the letter “identifies missed revenue opportunities on YouTube.”
Utopia’s Enhance tool, meanwhile, aims to “help improve music data,” Hjelmstedt wrote, adding that “at the heart of it all, we have the Utopia Platform – a unique data tool that collects data, sorts data and pays royalties”.
He claims in the letter that “Through our distribution companies, we already represent 97% of all UK labels, including all majors”.
“With the continued support of our shareholders, we can strongly position Utopia to drive the business to profitability and continue to evolve to deliver maximum shareholder value.”
Matias Hjelmstedt
Hjelmstedt added in the letter to shareholders: “With the continued support of our shareholders, we can strongly position Utopia to drive the business towards profitability and continue to evolve to deliver maximum shareholder value.
“Utopia’s Board of Directors strongly believes that this increase, this opportunity, must be attributed to our shareholders who already believe in Utopia.
“I hope you all see this for the opportunity it is and I look forward to your continued support through this options program so that we can focus on bringing great value to you, our shareholders in the future.”
This news follows a media report break it last month, which revealed that Sweden’s Utopia company bears a large unpaid tax debt, as employees in the region claimed that their pension bonuses (and in one case, even their salary) had not been paid .
MBW asked Utopia for a comment on the situation of his company and its employees in Sweden at the time.
A spokesperson told us on March 30: “Utopia has grown extremely fast in two years. Our Swedish entity alone has multiplied by 5 its workforce, ie one of our many development offices.
“We managed over 300 million euros last year and continue to grow very rapidly. Today, we are adapting our organization to changes in the market to ensure that we can continue to develop our business in a sustainable way.
“All payments mentioned in the post have already been identified and are being resolved. We have processes and structures in place to ensure this does not happen again.The music industry around the world
