15/264 Recent Developments Tencent Transactions In December 2017, Spotify and Tencent Holdings Limited (“Tencent”) completed two separate equity investments. In the first transaction, (i) Tencent Music Entertainment Group (“TME”) issued shares of TME to Spotify, and (ii) Spotify issued ordinary shares of Spotify to an affiliate of TME. In the second transaction, an affiliate of Tencent purchased ordinary shares of Spotify through a secondary purchase. For accounting purposes, these transactions were treated as share exchanges. Following these transactions, Spotify holds a minority stake in TME, and both Tencent and TME indirectly hold minority stakes in Spotify. In connection with the transactions, affiliates of TME and Tencent agreed not to transfer ordinary shares of Spotify for a period of three years from December 15, 2017, subject to limited exceptions, including transfers with Spotify’s prior consent; transfers to certain permitted transferees; transfers pursuant to a tender offer or exchange offer recommended by Spotify’s board of directors for a majority of Spotify’s issued and outstanding securities; transfers pursuant to mergers, consolidations, or other business combination transactions approved by Spotify’s board of directors; transfers to Spotify or any of its subsidiaries; or transfers that are necessary to avoid regulation as an “investment company” under the U.S. Investment Company Act of 1940, as amended. The transactions described herein are collectively referred to as the “Tencent Transactions.” Tencent, which owns a majority stake in TME, is an operator of social networks in China. TME is an early mover in authorized digital music in China, and provides digital music services to users including streaming, online live broadcasts, and karaoke services. Spotify believes the Tencent Transactions allow Spotify to invest in the long term potential of the music market in China and, in turn, TME to invest in the long term potential of the music market outside of China. Exchange of Convertible Notes In connection with the Tencent Transactions, in December 2017, certain accredited investors holding a portion of our $1,000 million in aggregate principal amount of convertible senior unsecured notes due 2021 (the “Convertible Notes”) exchanged $301 million of Convertible Notes, plus accrued interest, for 4,800,000 ordinary shares pursuant to an exchange agreement (the “Tencent Exchange”) and subsequently sold such shares to an affiliate of Tencent as described above. In December 2017, we entered into an exchange agreement with accredited investors holding a portion of our Convertible Notes pursuant to which we exchanged an aggregate of $110 million of Convertible Notes, plus accrued interest, for an aggregate of 1,754,960 ordinary shares (the “December Exchange”). In January 2018, we entered into an exchange agreement with accredited investors holding the remaining balance of our Convertible Notes pursuant to which the remaining $628 million of Convertible Notes, plus accrued interest, were exchanged for 9,431,960 ordinary shares (the “January Exchange”). Pursuant to this exchange agreement, subject to certain conditions, if we fail to list our ordinary shares on or prior to July 2, 2018, we have agreed to offer to each noteholder the option to unwind the transaction such that we will purchase back the ordinary shares that were issued to such noteholder pursuant to the exchange and we will issue such noteholder a new note that is materially identical to such noteholder’s note prior to the exchange. At December 31, 2017, pro forma for the January Exchange, we have no outstanding indebtedness. 8