Shares of music streaming company Spotify Technology (SPOT) rose Wednesday, after Scotland-based money manager Baillie Gifford lifted its stake, making it the company’s biggest shareholder.
Baillie disclosed in a Securities and Exchange Commission filing that it bought 2.6 million shares of Spotify in the fourth quarter, pushing its total to 21.7 million shares.
That amounts to 11.82% of the company’s shares outstanding, up from Baillie Gifford’s 10.41% stake as of Sept. 30.
The money manager’s fourth-quarter buying spree sent it above Spotify’s previous No. 1 shareholder, company co-founder Martin Lorentzon, who was at 11.59%, according to FactSet.
Morningstar analyst Ali Mogharabi has expressed some skepticism about the music streaming company's prospects.
“We still have our doubts about whether no-moat Spotify can create an economic network effect moat source,” he wrote in a report after the company’s third-quarter earnings release in October.
“While Spotify’s premium subscriber base continues to grow, which drove the third-quarter top line above S&P Capital IQ's consensus expectations, monetization per subscriber also continues to decline.”
Mogharabi puts fair value for the stock at $130. “We recommend waiting for a pullback before investing in this name,” he said.
The growing use of streaming services by music listeners gives Spotify some ballast, as streaming becomes the distribution platform of choice, Mogharabi wrote. But, “it faces intense competition and has a mostly variable cost structure that may limit Spotify’s future operating leverage and profitability.”
Spotify shares declined slightly Wednesday to $148.72. The stock has gained 13% over the past year.