Square Completes Acquisition Of Jay Z's Tidal

Jay Z closed the deal to sell Tidal, his music-streaming service to Jack Dorsey's Square and this deal puts Tidal's value at over $435 million.

Payment company, Square, now owns the remaining 80% of Tidal, which they acquired for $350 million in the deal which closed on Friday. In 2017, Jay Z sold close to 23% of the company to Sprint for an undisclosed amount. 

Square also bagged licensing deals with other big record labels, as well as the services of Desiree Perez, CEO of Roc Nation, who will serve as a board member. 

Founded in 2009 by Jack Dorsey, who's also co-founder of Twitter, and Jim McKelvey, Square Inc. is the American financial services company responsible for mainstream products like Cash App. Cash App is one of the few apps which offer users the ability to buy and sell Bitcoin, as well as fiat money. This is however not a surprise, as cofounder Jack Dorsey has always been outspoken about his faith in the gospel of Bitcoin.

The news of Square's acquisition of Tidal sparked a few questions on why a financial services company would want to acquire a streaming service. In his company's defense, Jack Dorsey tweeted back in March, that the company is capable to help the artists on Tidal grow their music, and fanbases, by building better tools and making it easier to promote and sell. According to him, Square had been able to help individuals and businesses via Cash App, and it can help artists as well.

Despite the array of big names like Madonna, Rihanna, and J. Cole, which partnered in the launch of the streaming service in 2015, Tidal has had a bit of trouble staying afloat. With less than 5 million users, compared to Daniel Ek's Spotify which has over 365 million monthly active users, it is understandable why Jay Z would want to hand over the reins to someone else.

Jay Z has however been reported to be joining Square's board of directors. Undoubtedly, he has made a huge profit with this deal, selling the company for about six times the $56 million he used to launch. 

Square's numbers are doing great, and it's expected that it'll impact its latest investment. The company released its earnings reports for the first quarter of 2021, showing that revenue went up as high as $5.06 billion, an increase of 266% year on year. This is mainly due to profit from Bitcoin revenue.

In a statement, the company announced that it had purchased an additional $170 million worth of Bitcoin, which is approximately 3,318 bitcoins, bringing its total bitcoins to about 8,000. As of the end of 2020, BTC represented 5% of the company's total assets.

In its Q1 2021 financial statement, Square also announced a 79% year-over-year growth in gross profit to $964 million.

The company recorded 11 times more Bitcoin revenue than last year, at $3.5 billion. However, bitcoin's gross profit was just 2% of the revenue, at $75 million.

Cash App gross profit went up 171% year over year, to end at $495 million. 

Square reveals that it expects gross profit to grow even further by more than 135% year over year for the sellers and 130% year over year for Cash App in April.

The company is yet to disclose explicit plans for Tidal, however, it is alleged that Jesse Dorogusker, head of hardware at Square, will serve as interim head until the company finds a permanent lead.

Shares of Square  (SQ) are currently trading at $237.65, 6.1% higher than before, as the company exceeded Wall Street's expectations in its financial report. While Wall Street expected $105 million EBITDA(Earnings Before Interest, Taxes, Depreciation, and Amortization), Square recorded $236 million.