Square (NYSE:SQ), Jack Dorsey’s digital payments company, is acquiring a majority ownership stake in the music streaming service Tidal.
Square’s stock was down about 2% in the pre-market. They slipped $16.37, or 7%, in Thursday’s first hour of trade to $217.83.
The deal is expected to be a mix of cash and stock of $297 million, and is expected to close in the second quarter of 2021. Existing artist shareholders will be the remaining stakeholders, Square said. Jay-Z, who bought Tidal in 2015 for $56 million, will join Square’s board of directors.
Dorsey said Jay-Z will also "help lead our entire company, including Seller and the Cash App, as soon as the deal closes."
The move is an effort to diversify Square, which is well known for its credit card processor, payment hardware and Cash App. Most recently, the company officially launched its banking operations.
Square said it doesn’t expect Tidal’s financial results to have a material impact on Square’s consolidated revenue or gross profit in 2021.
Tidal has struggled to keep up in the music streaming wars since its launch, and Dorsey’s stake could help push the company forward. Jay-Z and Dorsey have also partnered in the past. Last month, Dorsey said the pair endowed a Bitcoin trust to support the digital coin’s development in Africa and India.
Says Dorsey, "It comes down to one simple idea: finding new ways for artists to support their work. New ideas are found at intersections, and we believe there’s a compelling one between music and the economy."
