In early 2021, after Tidal missed its financial forecasts for 2020 and Block’s management reduced its valuation of Tidal to $350 million, Dorsey proposed buying 88% of the company for $309 million. The committee nevertheless instructed management to continue pursuing the deal. A slide presentation noted that Dorsey was the only person advocating strongly for the deal, which had received “substantial push back” from Block’s senior executives. A week later, the committee was presented with another report discussing Tidal’s history of quarterly losses, expiration of artist contracts, and $127 million in accrued liabilities. The report also noted the Norwegian criminal probe and a federal lawsuit by performing artists who said Tidal was withholding royalties they were owed. They included Tidal’s difficulties in attracting subscribers in a market dominated by Spotify, with most of the remaining market share captured by Apple and Amazon.
The directors agreed to form a transaction committee while Dorsey drafted and submitted a nonbinding letter of intent to purchase Tidal for $554.8 million.Ī management report to the transaction committee in October 2020 raised several red flags. By videoconference from the Hamptons, he raised the issue during a Block board meeting. Nevertheless, Dorsey, who is also the co-founder and former CEO of Twitter, began thinking of acquiring Tidal after summering with his friend Carter in the Hamptons in 2020, according to court documents.
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