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Square’s Tidal Acquisition Could Be A Warning Sign For Investors

Having already banked big on Bitcoin as well as progressed innovation in Twitter, Jack Dorsey now looks set to take on Spotify and Apple Music.

When news broke yesterday that Square (NYSE: SQ) had splashed $297 million on a majority stake in Jay-Z’s music streaming service, Tidal, I think there was only one question on everybody’s minds:


Can someone please explain?

Square CEO Jack Dorsey did his best to explain the deal, stating his belief that his company can replicate the success of Cash App in the world of music. Noting that “new ideas are found at the intersection,” Dorsey argued that the confluence of “music and the economy” is one such point of convergence. 

We’ll have to take his word for it because, from an investor’s point of view, this looks like a classic case of diworsification —  acquisitions that harm a company rather than benefit it.

With Square’s stock price already intrinsically linked to the volatility of Bitcoin, a $300 million bet on a saturated music industry dominated by Spotify and Apple is unlikely to benefit the company. Which begs the question: is this just a Dorsey vanity project? 

There may be some method to this madness though, with Dorsey explaining that he wants to create a direct artist-to-fan business model that could shake up the whole industry. As well as this, my colleague  Luke pointed out that Square could use Tidal for marketing purposes. The Cash App is very popular amongst young people and is actually cited in many popular songs, which may provide them with the opportunity to leverage Tidal. For example, offering Tidal subscription deals through the Cash App, or Cash App benefits to Tidal subscribers.

Whatever the reason, it will need to be justified by Square quickly, as it is worryingly reminiscent of Jack’s failed acquisitions on the Twitter side of things. 

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