Wednesday, October 3, 2018

Tencent reveals more about its IPO, Sony and Warner buy in | UNLIMITED | CMU


Tencent Music confirmed a load more stuff about its impending IPO via a formal filing with the US Securities & Exchange Commission yesterday.

Chinese web giant Tencent confirmed it was spinning off its music business via an IPO on the New York Stock Exchange back in July. Tencent Music operates as a label, music distributor and streaming platform in China. Among its streaming services is market-leading QQ Music.

The company reckons that the share sale should generate about a billion dollars, though that is what’s known as a ‘place holder’ amount, and sources reckon the firm could seek to raise double that amount when the IPO actually occurs. At one point earlier this year there was even talk of ambitions to raise $4 billion. Either way, if the IPO goes according to plan, the company is hoping for a market cap valuation in the region of $30 billion.

The company says that the money it raises will be spent on product expansion, content creation, marketing and possibly a few strategic investments and acquisitions.

The music industry has long seen China as a key emerging market, although it’s only in recent years that those expectations have started to become a reality. Tencent, which struck up exclusivity deals with the majors to become key partners of the global music industry, has been a leading player in establishing a market for recorded music in China.

Although QQ Music is in some ways the Chinese equivalent of Spotify – a company with which Tencent has a formal partnership – there are some differences between the Chinese firm and its Western counterparts. Not least the fact that Tencent is both a distributor and an operator in the streaming market. The Chinese services also have much more favourable revenue share arrangements with the labels and publishers.

Talking of labels and publishers, Tencent’s SEC filing also reveals that both Sony and Warner have bought themselves some shares in the business.

Both sitting on a pile of cash after divesting some or all of their Spotify stock earlier this year, the two majors together have bought $200 million worth of shares in Tencent Music. Maybe we’ll sell our single Spotify share and get in on the Tencent party pre-IPO. Wonder what $178.99 would get us?


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