Tencent Music soars on trading debut

Roman Schwartz
December 15, 2018

Chinese streaming giant, Tencent Music's much talked about U.S. IPO is finally here, with the company announcing a $1.1 Billion raise in the same.

The company's shares opened at $14.10, or 8.5 percent above their initial public offering price of $13 per share, giving Tencent a market capitalization of about $23 billion - on par with Swedish peer Spotify Technology SA's current valuation.

Tencent Music sold 41 million ADRs while existing shareholders sold a further 40.9 million, the source said, asking not to be identified ahead of an official announcement. The share price of its US counterpart, Spotify, is underwater after its IPO this year.

There was talk of the IPO being pushed back into 2019, but Tencent announced the listing was going ahead after the stock market responded positively to talks between the United States and China at the recent meeting of G20 countries in Buenos Aires.

Tencent Music's US IPO is the fourth largest among Chinese firms this year.

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Beyond different dynamics of the user base, the most meaningful difference between Tencent Music and Spotify is that Tencent Music is solidly profitable, thanks to its social entertainment business. It's the biggest year for mainland firms since 2014, when Alibaba Group Holding Ltd priced the world's largest IPO, the data show.

Tencent Music is the largest online music platform in China, boasting over 800 million active users monthly and expanding along with streaming apps such as Kuwo, QQMusic, KuGou, and even the karaoke app We Sing. Supervoting Class B shares, which get 15 votes per share, are held by insiders and parent company Tencent. Other notable IPOs by Tencent-backed companies this year include, on-demand services company Meituan-Dianping which raised Dollars 4.2 billion in Hong Kong and travel company Tongcheng-Elong which raised USD 233 million also in Hong Kong.

The IPO was initially scheduled for October 18, but the offering was postponed over fears that the brutal sell-off that wreaked havoc on markets in October and November would affect its pricing. Tencent Music and Xie "intend to vigorously contest [the claims]", according to a filing to the US Securities and Exchange Commission. By comparison, Spotify lost a net US$520 million.

Online music services, which is said to "primarily" consist of music subscriptions, digital downloads, ad-supported music services and the sub-licensing of music to other content providers, contributed about 30 percent to its total revenue in the first nine months of the year.

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