Tencent Music Entertainment to file for $30bn US IPO this week – report

Another giant of digital music is about to float on the stock exchange in the United States.

Tencent Music Entertainment (TME), which is majority-owned by massive Chinese corporation Tencent, is reportedly readying an application for an IPO in the US this week.

That’s according to an unverified (but seemingly well-informed) scoop from China-based news group Sina.

Sources suggest that TME will file an IPO application with the US Securities and Exchange Commission on Friday (July 6) – officially beginning the firm’s listing process.

The IPO’s lead underwriters are said to be Goldman Sachs and Morgan Stanley.

A conservative pricing range being offered by US investment banks for TME is apparently $29bn to $31bn, which has largely been benchmarked against Spotify.

Three months on from floating on the New York Stock Exchange (April 3), Spotify currently boasts a market cap of $29.6bn.

According to fiscal filings cited by Sina, Tencent Music posted revenues of nearly RMB 5bn ($753m) in 2016, with a net profit of nearly RMB 600m ($91m).

In 2017, the company’s net profit grew considerably to exceed RMB 1.88bn ($283m).

It is now expected that TME’s revenues will exceed RMB 17bn ($2.6bn) in 2018.

Tencent Music owns digital music services QQ Music, Kuwo and KuGou in China.

China entered the Top 10 biggest recorded music markets last year.

The nation generated $292.3m for labels and artists, according to IFPI figures, up 35.3% on the prior year.

In May, Sony Music Entertainment COO, Kevin Kelleher, told investors: “We think in five years China could be a Top 5 market.

“Tencent, which is a major player in that marketplace, has 700m+ people using their music services every month, with 25m paying subscribers.”

Kevin Kelleher, Sony Music

“Tencent, which is a major player in that marketplace, has 700m+ people using their music service[s] every month, with 25m paying subscribers.

“They’ve got great ambitions, as have some other companies.”

In December last year, Tencent took control of a 9.1% stake in Spotify – of which, around a quarter was directly owned by TME.

In return, as part of a stock swap, Spotify took control of a non-controlling equity interest of approximately 9% in Tencent Music Entertainment.

MBW revealed last month that Sony/ATV and EMI Music Publishing both own minority stakes in Tencent Music Entertainment.

A Sony/ATV spokesperson told MBW in a statement: “If at any time the company’s equity in Tencent Music Entertainment is monetized our songwriters will share the benefits of it, which is our customary practice.”

MBW understands that Sony/ATV managed to get hold of equity in China Music Corp (CMC), before Tencent acquired a majority stake in the then-$2.7bn-valued company in 2016.

As part of that merger, TME took control of Kuwo and KuGou.

(All RMB currency conversions above completed at current RMB-USD rates.)Music Business Worldwide