Tencent Music cuts back listing target to $2bn, say insiders

Hong Kong — Tencent Music Entertainment Group, China’s biggest music streaming company, is seeking to raise about $2bn in a US listing, according to three people close to the deal, down from as much as $4bn touted earlier.

The subsidiary of tech giant Tencent Holdings filed confidentially with the US Securities and Exchange Commission two weeks ago, three people with knowledge of the matter said.

It will be one of the biggest listings in New York by a Chinese company this year.

Tencent Music had earlier been seeking to raise between $3bn and $4bn, Thomson Reuters publication IFR reported, which would have made it the biggest Chinese float in the US so far in 2018, ahead of streaming company iQiyi’s $2.42bn initial public offering (IPO) in March.

Lower valuation

Tencent Music had been seeking a valuation of about $25bn, according to IFR. The sources did not disclose whether the now smaller deal relates to a lower valuation or fewer shares to be sold.

Tencent said in a statement that the Reuters report was not accurate. It did not elaborate or say which part of the report was inaccurate. "Please refer to official statements or announcements by the company for facts relating to the proposed offering," it said.

Tencent Music runs music service providers QQ Music, KuGou and Kuwo, controlling three-quarters of China’s booming music streaming market.

The filing was submitted to the Securities and Exchange Commission on September 7, according to two of the people close to the deal.

The sources declined to be named because the information was not public.

The rapid growth in streaming music services in recent years has led to a recovery in the fortunes of the global recorded music industry, which enjoyed its third year of positive revenue growth in 2017, according to a report by industry body IFPI.

Tencent Music’s float follows that by Swedish music streaming service Spotify earlier this year as online streaming becomes a bigger part of the recording industry’s revenue.

In December 2017, Tencent and Spotify agreed to a share swap after which Tencent ended up with a 7.5% stake in Spotify, including shares held through Tencent Music, according to the prospectus filed by Spotify ahead of its own IPO in April.

Tencent Music will be the latest in a series of Chinese companies to have tapped US markets this year.

Other groups to have held IPOs include electric-vehicle start-up NIO — which raised $1bn — and online group discounter Pinduoduo, which raised $1.63bn.

Reuters