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Tencent’s IPO is go

By | Published on Tuesday 4 December 2018


Chinese web giant Tencent is ploughing ahead with the IPO of its music division on the New York Stock Exchange after the investment markets responded well to talks between China and the US at last week’s G20 meeting in Buenos Aires.

Tencent Music, of course, owns China’s market-leading streaming service QQ Music, as well as other digital, distribution and label operations. The main Tencent company confirmed earlier this year that it would spin off its music division as a standalone business, which would then be floated on the stock exchange in New York.

The original plan was to IPO in October, but things were pushed back as the tech sector at large started to see its stock prices dip. Donald Trump’s trade war with China, and Tencent’s main rival in the Chinese music market – NetEase – raising $600 million in new finance, were also seen as possible factors for why Tencent might delay listing its music company.

Last month there was even talk of the IPO being pushed back into 2019. Though sources told the FT that if it looked like US/China relations were improving on the back of the G20 meeting, Tencent would likely get things going straight away. Which is what the company did after Trump and Chinese President Xi Jinping agreed a temporary ceasefire in their ongoing trade war, resulting in a predictable boost in the share prices of Asian businesses.

In a new filing with the US Securities & Exchange Commission yesterday, Tencent confirmed it is seeking to raise between $1.07 billion and $1.23 billion through the IPO. Which is pretty much in line with what the company previously indicated, although some had speculated that it might ultimately seek something more like $2 billion.

Tencent previously said that that money will be spent on product expansion, content creation, marketing and possibly a few strategic investments and acquisitions.

A source with knowledge of the IPO told Reuters that shares will likely begin trading on 12 Dec, with the company aiming for a market cap valuation for Tencent Music similar to the current valuation of Spotify, with which – of course – Tencent has a formal alliance. That would be somewhere in the region of $25 billion.

Sources also say that Tencent is keen to push ahead with the IPO in a speedy fashion in no small part because of fears that the easing of political tensions between the US and China might be temporary, so better to go through with the deal now and avoid being impacted by any heightening of the US/China trade war in 2019.