The music industry’s latest IPO has arrived.
Chinese tech giant NetEase‘s subsidiary Cloud Village – which operates music streaming service NetEase Cloud Music – officially listed on the Hong Kong Stock Exchange today (December 2).
Cloud Village raised HK $3.28 billion (approx. US $421m at current exchange rates) in its IPO, with its share price set at HK $205 (approx. US $26.3), which was the mid point of the indicative offer price range set in the company’s pre-IPO prospectus.
As reported by Bloomberg, Cloud Village’s shares fell 2.5% to close at HK $199.90 (US $25.6).
Cloud Village’s pre-IPO prospectus revealed three “cornerstone investors” backing its listing, including current parent company NetEase, Orbis Investment Management Limited, and Sony Music Entertainment.
The latter company agreed to buy shares in Cloud Village worth USD $100 million, as per an agreement signed by Cloud Village and Sony Music on November 22.
According to Cloud Village’s pre-IPO prospectus, the final offer price being set at HK $205 ($26) per share suggests that Sony Music’s investment of $100 million resulted in the major record company acquiring 3,801,000 shares in the newly-public Cloud Village (see below).
Alongside Sony Music’s $100 million investment, Orbis Investment Management invested US $50 million in Cloud Village.
Plus, Cloud Village’s parent company, NetEase, has made a US $200 million cornerstone investment in the spun-out music subsidiary.
Cloud Village says that it plans to use the net proceeds from its IPO, including the $350 million from these three cornerstone investments, for “cultivating its community, innovating and improving technological capabilities, selected mergers, acquisitions and strategic investments, and general corporate purposes”.
Elsewhere in Cloud Village’s pre-IPO prospectus, the company revealed that its Monthly Active Users (MAUs) of online music services grew from 173.2 million in the six months ended June 30, 2020 to 184.5 million in the six months ended June 30, 2021.
NetEase Cloud Music’s monthly paying users of online music services, meanwhile, more than doubled from from 13 million in the six months ended June 30, 2020 to 26.1 million in the six months ended 30 June 2021.
According to NetEase, the firm’s growth in MAUs of online music services “was primarily due to our continued efforts in improving user experience, innovating interactive features and enriching our content offerings”.
In a letter issued to investors today, NetEase CEO William Ding explained that NetEase Cloud Music’s ambition in the future is to become an “audio-centric universe”.
He added that “audio-based content is becoming ever more diverse” and pointed towards music, podcasts, live streaming, karaoke, radio and other formats as “creating multifaceted experiences and scenarios”.
Added Ding: “NetEase Cloud Music’s mission is ’empowering and connecting people through music.’ We care deeply about music. We care even more about people’s emotions, creations, and inner worlds.
“In the future, our Cloud Village will encompass more enticing content, functions and capabilities, converting more basic users into active participants and creators. In the past, you might have just used our platform to listen to music created by others.”
“We strive to give independent artists the tools and resources to improve the efficiency and depths of their creative endeavors. We understand these are challenging tasks for an uncharted territory. But we have never leant toward an easier path.”
William Ding, NetEase
Ding also told investors that NetEase Cloud Music “is committed to investing in our support of independent artists”.
He continued: “For those who pursue music as your dream, we hope that you no longer need to worry about the right stage for your talent and passion, and that your family and friends no longer need to worry about you financially.
“We hope you will see a music industry that is moving toward improving quality, rising standard and evolving tastes, where we will continue to be a driving force behind these positive changes.”
In closing, Ding explained that NetEase Cloud Music’s aspiration is “to set our sights on the global stage, empowering independent artists to advance Chinese-pop, and let the world hear China’s voices”.
He added “We strive to give independent artists the tools and resources to improve the efficiency and depths of their creative endeavors. We understand these are challenging tasks for an uncharted territory. But we have never leant toward an easier path.
“We have already proven ourselves when we first stepped into uncharted waters in China’s original games and we will do it again for China’s independent musicians and original music.”
Music Business Worldwide