Spotify WACC - Weighted Average Cost of Capital
The WACC of Spotify Technology SA (SPOT) is 7.2%.
| Range | Selected | |
| Cost of equity | 5.8% - 8.7% | 7.25% |
| Tax rate | 15.8% - 17.0% | 16.4% |
| Cost of debt | 4.0% - 4.5% | 4.25% |
| WACC | 5.7% - 8.6% | 7.2% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.42 | 0.68 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 5.8% | 8.7% |
| Tax rate | 15.8% | 17.0% |
| Debt/Equity ratio | 0.01 | 0.01 |
| Cost of debt | 4.0% | 4.5% |
| After-tax WACC | 5.7% | 8.6% |
| Selected WACC | 7.2% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| SPOT | Spotify Technology SA | 0.01 | 0.9 | 0.88 |
| AMC | AMC Entertainment Holdings Inc | 3.11 | 0.61 | 0.17 |
| CSSE | Chicken Soup for The Soul Entertainment Inc | 1011.49 | 2.08 | 0 |
| FWONA | Liberty Media Corp | 0.09 | 0.57 | 0.53 |
| KUKE | Kuke Music Holding Ltd | 0.93 | -0.23 | -0.13 |
| RDI | Reading International Inc | 4.55 | 0.31 | 0.06 |
| SEGI | Sycamore Entertainment Group Inc | 3.2 | -0.84 | -0.23 |
| TME | Tencent Music Entertainment Group | 0.03 | 0.66 | 0.64 |
| WMG | Warner Music Group Corp | 0.28 | 0.64 | 0.52 |
| WWE | World Wrestling Entertainment Inc | 0.05 | 0.61 | 0.58 |
| Low | High | |
| Unlevered beta | 0.13 | 0.52 |
| Relevered beta | 0.13 | 0.52 |
| Adjusted relevered beta | 0.42 | 0.68 |
Spotify's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for Spotify:
cost_of_equity (7.25%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.42) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.