Business News Labels & Publishers Top Stories

Universal Music shares surge 38% on day one of trading

By | Published on Tuesday 21 September 2021

Universal Music

Shares in the all new standalone Universal Music Group shot up 38% earlier today following the music major’s listing on the Euronext stock exchange in Amsterdam. It means that the music rights group had a valuation this morning of 45 billion euros.

The stock market listing brings to an end long drawn out efforts by previous owner Vivendi to cash in on the resurgence of the recorded music business since 2015, fuelled by the streaming boom. The French conglomerate first formally announced plans to sell off chunks of Universal Music – the world’s biggest record company and second biggest music publisher – back in 2018.

Despite some speculation that that would involve some sort of initial public offering on a stock exchange, Vivendi subsequently said its plan was to sell minority stakes in its music business to “strategic partners”. That plan led to 10% of Universal Music being bought by a consortium led by Chinese web giant Tencent right at the end of 2019.

But then, in February 2020, Vivendi announced a stock market listing for the Universal Music Group was in fact on the agenda. The majority of the shares in a standalone UMG would be distributed to Vivendi’s current shareholders, with Vivendi itself becoming a minority shareholder. Meanwhile, as prep for the listing got underway, the Tencent consortium bought another 10%, and then Vivendi sold another 10% stake to investment entities led by hedge fund manager Bill Ackman.

With the Ackman deals, UMG had an enterprise valuation of 35 billion euros. Last night the Euronext stock exchange announced a “technical reference price” for UMG of 18.50 euros per share, which equated to a 33.5 billion euros valuation. And then, with first day trading, we got the 38% spike in the share price, resulting in the valuation of 45 billion euros.

Analysts remain mainly positive about the prospect of Universal Music, based on predictions that the streaming boom is not yet over and the music rights market is set for further growth in the years ahead. And the only music rights business of a similar size to UMG – Sony Music – is a subsidiary of Sony Corp, of course, so can’t be invested in directly. It remains to be seen if that optimism is justified, and just how safe a bet a UMG share buy really is.

However, in the short term, all the big numbers being bandied about around UMG’s listing – and regarding the future profitability of the music major – is only going to escalate claims in the artist community that the record companies are disproportionally benefiting from the steaming boom, partly because of the increased importance of catalogue recordings, and the way many labels have chosen to unfairly interpret – in a self-serving way – out-dated record contracts that make no sense in the digital era.

Those claims, of course, have led to demands that copyright law be revised to level the playing field somewhat and guarantee heritage artists a bigger cut of streaming money.

Now that it’s directly listed on a stock exchange – and therefore subject to greater scrutiny – Universal Music may be forced to respond to those claims and demands in a much more meaningful way moving forward, instead of employing its past apparent strategy of denial, bluster and just hoping that the moaning musicians will eventually get bored and fuck off.