Wall St Journal : Tencent Music Plans IPO; Valuation Could Exceed $25 Billion

Source: https://www.wsj.com/articles/tencent-music-entertainment-group-preparing-ipo-1524434289

Tencent Music Entertainment Group, China’s largest music-streaming company, is preparing what would be one of the biggest technology IPOs ever following the successful debut of its European counterpart, Spotify Technology SA.

The digital-music business of Chinese internet giant Tencent Holdings Ltd. TCEHY -1.71% plans to interview potential underwriting banks over roughly the next month, according to people familiar with the matter.

The initial public offering, potentially coming in the second half of 2018, would be one of the largest deals of the year and is expected to raise billions in proceeds, some of the people said. Tencent Music is expected to list in the U.S., but it is unlikely to make a final venue decision for several months, they said.

Tencent Music’s move toward going public is the latest sign that the IPO market is gaining steam.

Tencent Music’s offering could value the business in excess of $25 billion, some of the people said. This was the company’s value in recent private transactions, The Wall Street Journal reported last month. That was a sharp jump from its $12.5 billion valuation in late 2017 when Swedish music-streaming company Spotify bought a 9% stake in the company as part of a share swap.

Should investors give it that valuation in its IPO pricing, it would be the fourth-biggest U.S.-listed tech IPO on record, measured by valuation at the time of the offering, according to Dealogic. That doesn’t include Spotify, which didn’t raise capital in its public offering but was valued at about $29.5 billion at its first trade.

Still, there is no guarantee the company will proceed with a share sale in New York or elsewhere, and pre-IPO valuations can fluctuate until a company prices its shares.

Investors are excited about Tencent Music because of its connection to Tencent Holdings, which has a stake of more than 50% in Tencent Music, as well as its position in the marketplace: Tencent Music, which operates the popular music app known as QQ Music and others, recently had 700 million monthly active users across personal computer and mobile platforms largely in China, according to the company. Investors have also been hungry for big technology IPOs since they typically offer potential for significant growth.

Tencent Music was created in mid-2016 after Tencent Holdings bought a controlling stake in China Music Corp. and combined it with Tencent’s existing streaming business. Last month, Tencent Holdings President Martin Lau said Tencent Music could be a candidate for a future spinoff.

The possible Tencent Music offering could come as the IPO market has come surging back, particularly among technology companies listing on U.S. exchanges. After the worst year for IPOs in more than a decade, IPO activity jumped in 2017 and has continued to increase in volume and number of companies seeking public offerings on U.S. exchanges this year.

Based on their pipeline, underwriters have said they expect activity in the second half of 2018 to be busier than this year’s already elevated levels.

Still, shares of other Tencent-backed companies that have listed in New York have traded down since their IPOs on weaker-than-expected performance. Shares of Chinese search engine Sogou Inc. are down 35% since November, while shares of Singapore-based gaming and e-commerce company Sea Ltd. are down more than 20% since October. Tencent Holdings itself, which is listed in Hong Kong, is up sharply from a year earlier even after its share price has dropped over the last month.

Spotify went public on the New York Stock Exchange in early April in an unusual offering in which it didn’t raise money. Late last year, ahead of the listing, Tencent Music and Spotify swapped stakes in each other’s companies. The deal valued Tencent Music at $12.5 billion based on Spotify’s 9% stake. Tencent’s nearly 10% of Spotify valued it at nearly $20 billion.

Unlike Spotify, Tencent is expected to go with a traditional IPO.

As a public stock, Spotify’s shares have so far traded largely above its private-market prices, which had already more than doubled from its pre-IPO share price a year ago. That could bode well for investors in Tencent Music when the stock hits the public markets.

—Wayne Ma contributed to this article.

Write to Maureen Farrell at maureen.farrell@wsj.com and Julie Steinberg at julie.steinberg@wsj.com


I was waiting for how it was going to impact West San Jose real estate. It’s bad when I think of that before Wall Street Journal.


Corrected title !

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I bet $10 it will list in HK instead of US.

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They should let people waste time and get fat like America.