Hoping to hit a high note with investors when public trading begins on Wednesday in New York. Tencent Music Entertainment looks set to be the third largest Chinese initial public offering in the U.S. this year. That’s behind video streaming company iQiyi and social shopping app Pinduoduo. But the lead up to the IPO has been far from harmonious.
CGTN’s Nick Harper reports.
“I mean it’s kind of like the incredible melting ice cube. This thing started out with great aspirations,” said Daniel McClory, Managing Director of Boustead Securities.
The company, which owns three streaming platforms and the karaoke app WeSing, had hoped to go public in October with the goal of raising $4 billion. But it delayed the move amid U.S.-China trade tensions and market volatility. Tencent now aims to raise up to $1.2 billion dollars.
“This has gotten downsized way beyond recognition in where it was originally intended to be. So it appears as though the outlook from both the company Tencent Music as well as the underwriters is we just have to get this deal done,” McClory added.
The last U.S. IPO for a music streaming company failed to strike a chord with investors. Shares in Sweden’s Spotify plunged ten percent on their first day of trading earlier this year. But unlike Spotify, Tencent is profitable. According to an exchange filing, the company made almost $400 million in net income for the first nine months of this year, compared to a loss of more than $500 million for Spotify.
Listing in the U.S. rather than in China gives Tencent access to a larger capital market, meaning the company could raise more money, possibly giving it a higher valuation, and allowing it to use those newly-acquired U.S. dollars to buy assets globally.
“IPO would give them greater visibility, it’ll be a known name in the United States once it goes public here, so it’ll raise to the profile of Alibaba – perhaps not to the same market cap – but it’ll give them great, positive publicity in the United States,” finance professor at NYU Stern, Haran Segram said.
Some analysts said a boost in name recognition could be key to Tencent Music’s worldwide success, as it looks to make some noise in the fiercely competitive streaming music market.
Cherie Hu discusses China’s music industry
CGTN’s Rachelle Akuffo spoke with music business journalist and researcher Cherrie Hu, about Tencent Music’s IPO and China’s music industry.