Low Tide?

[WMW]

By Kjetil Malkenes Hovland

April 1, 2016 11:12 a.m. ET <!--[if ! lte IE 8]-->

OSLO—A year after buying music streaming service Tidal, rap mogul Jay Z suspects company books contain jarring notes.

Jay Z, who took control of Tidal in March 2015 for $56 million through his own firm, Project Panther Bidco Ltd., has reached out to previous owners of the music streaming service, alleging subscriber numbers had been overstated at the time of the transaction.

In a letter sent to Tidal’s former owners, Jay Z’s firm said: “Panther has learned that the actual number of subscribers at that point in time was significantly lower and that the amount represented in the due diligence documents were greatly overstated.”

Several former owners, including Norwegian media group Schibsted ASA SCHA 0.39 % and Swedish private-equity fund Verdane Capital, confirmed receiving the letter.

Both rejected accusations of misrepresentation, saying Tidal’s parent company, Aspiro Group AB, had been listed in Stockholm ahead of the sale and had reported its financial data in line with regulations.

“We disagree with the accusations in the letter and any potential claims,” a Schibsted spokesman said Friday. “The buyer also did a due diligence of the company. It is worth noting that this was more than one year ago.”

Tidal said it had served legal notice to parties involved in the March 2015 sale after an audit showed that the total number of subscribers was “well below the 540,000 reported to us by the prior owners.” Tidal declined further comment.

On Feb. 9, 2015, shortly before the transaction, Aspiro published a stock market notice stating that it had 503,000 paying users, down 11% on the year. Only 17,000 out of those were subscribing directly to Tidal, the statement said. Wimp, another music streaming service acquired by Jay Z as part of the deal, had 95,000 direct subscribers. Another 391,000 people had access to the services via partners that added Tidal or Wimp subscriptions to their cellphone or TV subscription packages.

Earlier this week, Tidal said it has expanded its user base to 3 million, leaving it far behind Swedish rival Spotify AB, which says it has 30 million paying subscribers.

News of Jay Z’s concerns over subscriber data at Tidal were first reported by Norwegian newspaper Dagens Naeringsliv.