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Tencent Music presses play on $1.2 billion U.S. IPO

Reuters  |  HONG KONG/NEW YORK 

By Julia and Julie Zhu

HONG KONG/(Reuters) - launched its hotly-anticipated initial public offering (IPO) of up to $1.2 billion on Monday after global stock markets were boosted by a truce brokered by and leaders in their trade conflict.

The music arm of is looking to raise between $1.07 billion and $1.23 billion in a Stock Exchange IPO, according to a filing with the Securities and Exchange Commission.

The company originally planned to launch its offering in mid-October, previously reported.

But it then decided to delay the IPO over worries the steep global stock market sell-off in the past few months would affect the pricing.

The decision by and the to call a 90-day hiatus on their trade war over the weekend sent Asian shares soaring on Monday as markets breathed a sign of relief that tensions would ease, at least temporarily.

The music streaming giant is selling 82 million American Depositary Receipts (ADRs) in a range of between $13 and $15 each, according to the filing.

Tencent Music could sell an additional 12.3 million shares if an over-allotment option is exercised.

The $1.23 billion figure is smaller than the $2 billion that was earlier mooted as a fundraising target, though the company never confirmed such a number.

A source close to the deal said Tencent Music was keen to get itself listed this year because it was worried U.S.-trade tensions would worsen, not because it desperately needed fresh money.

"It's not worth waiting any longer for a potentially higher valuation if they have to deal with so many uncertainties," said the source.

At $1.23 billion, the IPO would still be one of the largest by a company in the this year, behind the $2.4 billion raised by video streaming company in March and the $1.6 billion garnered by Pinduoduo in July.

In total, companies have raised $7.8 billion from U.S. IPOs so far this year - the biggest amount since 2014 - according to Refinitiv data.

Tencent Music owns streaming apps QQ Music, Kugou and Kuwo as well as karaoke app WeSing, and claims more than 800 million monthly active users.

The company is targeting a valuation of between $22 billion and $25 billion, according to a source close to the deal, roughly on par with that of its Swedish music streaming counterpart Spotify Technology, which went public in in April and has a market value of $24.3 billion.

Tencent Music, which has a cross shareholding deal with Spotify, offers more in the way of socially that makes it profitable.

It reported a 244 percent jump in profit in the first nine months of this year to $394 million from $114 million in the same period in 2017. By comparison, its Swedish peer posted a net loss of $520 million over the first nine months of the year.

The company will open its books on Dec. 4 and shares will begin trading on Dec. 12, according to the source.

Bank of America, Deutsche Bank, Goldman Sachs, and are the lead sponsors of the deal.

($1 = 6.8901 Chinese yuan renminbi)

(Reporting by Julia and Julie Zhu; Editing by Mark Potter)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Mon, December 03 2018. 17:57 IST
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