Tencent Music Entertainment has confirmed that it is launching a secondary listing in Hong Kong by way of introduction, meaning that the company will not raise new funds or issue new shares unlike in traditional IPOs.
The Chinese music streaming giant, which operates QQ Music, Kugou and Kuwo, confirmed that it will list its class A ordinary shares by way of introduction on the Hong Kong stock exchange’s main board, according to a media release on Wednesday (September 14).
The new shares will be fully fungible with TME’s American depositary shares listed on the NYSE, where the company plans to keep its main listing status.
The company has already received in-principle approval from the Hong Kong bourse operator on Wednesday and subsequently filed its prospectus.
Tencent Music is expected to trade in the Asian financial hub on September 21 under the ticker 1698.
The company appointed JP Morgan Securities and Goldman Sachs to sponsor the deal.
TME first disclosed its Hong Kong IPO plans in March, joining a number of Chinese firms that are shifting their listing venues closer to home as tensions between China and the US escalate.
In May, the company was added to a “provisional list” of Chinese firms with auditing issues and are at risk of being delisted from US bourses. The list is part of the Holding Foreign Companies Accountable Act in the US that requires the US Securities and Exchange Commission to identify public companies with auditing violations.
Concerns that over 200 Chinese firms could be delisted from the NYSE and the Nasdaq stock market prompted a number of Chinese companies to either move their listings or launch secondary listings in Hong Kong.
Chinese realtor KE Holdings and electric-vehicle maker NIO have earlier this year completed their listings via introduction in Hong Kong, while ride-hailing firm Didi Global has also expressed its intention for a listing by introduction in Hong Kong after being hit with a cybersecurity probe that had marred its blockbuster listing in New York last year.
But even through regulators in China and the US recently reached a landmark deal on auditing rules for US-listed Chinese stocks, TME has decided to continue with its plan to go public in Hong Kong.
“Our directors consider that it would be desirable and beneficial for our company to apply for a secondary listing on the [Hong Kong] stock exchange by way of introduction as our directors believe that it will provide our shareholders with greater liquidity and flexibility amid an evolving regulatory environment,” TME said in its Hong Kong IPO prospectus.
China’s tech crackdown and the government’s attempts to take on monopolistic practices in the private sector led to TME’s decision to give up its exclusive music copyright agreements.
But that didn’t stop TME from growing its business in the past year. In 2021, it generated RMB 31.24 billion ($4.48 billion) in revenue, up from RMB 29.15 billion in 2020. It also continued to grow its subscriber base, adding 2.5 million paying users in the second quarter of 2022 to 82.7 million.
The listing in Hong Kong would give TME access to more capital market funds after raising $1.1 billion in its US IPO Back in December 2018. It also follows the IPO of its rival Cloud Music, owned by NetEase, in late 2021. Cloud Music raised $422 million from the Hong Kong listing.Music Business Worldwide