Ten­cent mu­sic arm de­buts on NYSE

China Daily (Canada) - - MARKETS - By CHENG YU [email protected]­nadaily.com.cn

Ten­cent Hold­ings Ltd’s mu­sic arm fi­nally pressed the play but­ton, de­but­ing on the New York Stock Ex­change on Wednes­day, as part of the tech gi­ant’s ef­forts to di­ver­sify its busi­ness and seek new growth driv­ers.

Ten­cent Mu­sic En­ter­tain­ment Group priced its ini­tial pub­lic of­fer­ing at $13 per Amer­i­can de­pos­i­tory re­ceipt, and seeks to raise $1.07 bil­lion in to­tal, the com­pany stated on Wednes­day.

The IPO val­ues the mu­sic sub­sidiary at around $21.3 bil­lion, a price ri­val­ing world-lead­ing mu­sic stream­ing com­pany Spo­tify.

An­a­lysts said the lat­est IPO is part of the jug­ger­naut’s broader push to ex­pand its op­er­a­tions, as its core so­cial me­dia busi­ness is about to peak in terms of growth.

“It is a way for Ten­cent to di­ver­sify and bol­ster its busi­ness, given that the mu­sic arm has big ad­van­tages in ob­tain­ing re­sources in both con­tent and copy­right,” said Li Jun­hui, se­nior re­search fel­low at the China Univer­sity of Po­lit­i­cal Science and Law.

“Sim­i­lar to its video ser­vices, these ad­van­tages in the mu­sic seg­ment can help the com­pany to mon­e­tize its busi­ness quickly,” he added.

With a com­bined 800 mil­lion monthly ac­tive users, TME runs four lead­ing mo­bile mu­sic apps in China: QQ Mu­sic, Ku­gou Mu­sic, Kuwo Mu­sic and mo­bile karaoke app WeSing.

It re­ported a 244 per­cent jump in profit in the first nine months of this year to $394 mil­lion, from $114 mil­lion in the same pe­riod in 2017. That surge was thanks to ris­ing user sub­scrip­tions for on­line mu­sic ser­vices and pur­chas­ing so­cial en­ter­tain­ment ser­vices.

In­dus­try in­sid­ers noted that this IPO has the same goal as Ten­cent’s over­all in­vest­ment strat­egy, which aims to gain rev­enue through tap­ping into di­verse ver­ti­cal ar­eas, in­clud­ing so­cial me­dia, e-com­merce, en­ter­tain­ment, gam­ing, as well as New Re­tail.

“Ten­cent has paid great at­ten­tion to dif­fer­ent ar­eas in re­cent years, try­ing to break its tra­di­tional stereo­type of only be­ing in so­cial me­dia and gam­ing. The ul­ti­mate goal is to guar­an­tee that its fu­ture devel­op­ment can be di­ver­si­fied and sus­tain­able,” said Neil Wang, pres­i­dent of Frost & Sul­li­van China.

Wang noted that such ef­forts have paid off, as the com­pany has al­ready reaped the re­ward from its in­vest­ments in other com­pa­nies.

Ac­cord­ing to pre­lim­i­nary cal­cu­la­tions, of the 40 or so Chi­nese in­ter­net com­pa­nies that went pub­lic this year, 16 are Ten­cent­backed ones. They in­clude smart­phone maker Xiaomi Corp, on­de­mand ser­vice provider Meituan-Dian­ping and videostream­ing site iQiyi.

Ten­cent’s third quar­ter fis­cal re­port showed that its net in­come rose 30 per­cent to 23.3 bil­lion yuan ($3.4 bil­lion) this year, thanks to lower op­er­at­ing ex­penses and in­vest­ment gains.

It has gen­er­ated higher in­come from in­vest­ment-re­lated items com­pared to the same pe­riod last year. The value of its eq­uity stakes in listed com­pa­nies to­tals 273 bil­lion yuan by Septem­ber, ac­cord­ing to its fis­cal re­port.

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