After delaying its IPO plans in October due to volatile market conditions, Tencent Music Entertainment Group (TME) finally debuted Wednesday at the New York Stock Exchange, trading under the ticker symbol of “TME”, closing the day at US$14.19 apiece, around 9.2% above its initial offer price of US$13 per share (the lower-end price range).
Bank of America, Deutsche Bank, Goldman Sachs, JPMorgan, and Morgan Stanley are the lead underwriters of Tencent Music’s offering.
Overall, the operator behind China’s largest music app offered more than 82 million American Depositary Shares (ADS) to raise close to US$1.1 billion. TME’s public debut that yielded an implied valuation of US$21.3 billion did not beat its Swedish twin Spotify, but it’s still one of the largest US IPOs since Alibaba’s back in 2014, and contributed to the US$8 billion total raised by Chinese tech companies in US IPOs this year, according to Bloomberg. Spotify owns 9% of TME’s shares.
Other than slowing global growth and US-China trade war fears, another explanation for TME’s muted public debut performance might be that investors have yet to fully understand China’s music market. TME’s recent prospectus still reveals low paying ratio for online music and that could have triggered a negative response, and China’s music piracy problem is still an issue.
However, TME has shown that it has managed to circumvent the problem by adapting its business model for Chinese music consumers. By running successful music apps like Kugou Music, Kuwo Music, and QQ Music, it has captured 75% of the Chinese market and has more than 800 million monthly active users (MAU) to date.
That level of success pays off. Spotify is still struggling to bring in profits as it battles with costly music licensing. Meanwhile, TME has been making consistent annual profits since 2016.
Nevertheless, TME made it to the US public markets in 2018, joining Chinese tech companies like Pinduoduo and iQiyi amongst others, amid many uncertainties, which included investor Hanwei Guo sueing TME just mere days before its debut day.
Editor: Nadine Freischlad