Report: Tencent Music Inching Toward IPO

Tencent Music is the music distribution division of the social media behemoth Tencent, which is based in China, and could have an initial public offering late in 2018.

Over the weekend, a report was published that said Tencent is expected to interview banking advisors within the upcoming month and would aim to float its music division before the end of 2018.

An IPO would raise new capital and value Tencent Music at more than $25 billion. Private funding of cash has recently given the company a value of close to that, in an increase of valuation prior to Spotify being floated in Europe.

The weekend report suggested Tencent Music was most likely to list on a stock exchange in the U.S., but said the decision was not yet taken. Many of today’s tech companies are taking advantage of securities rules in the U.S. that allow more than one share class. That allows founders as well as management to maintain corporate control despite a majority of equity being sold off.

Currently, Tencent is China’s biggest business and listed on the exchange in Hong Kong. In 2017, it floated off Tencent Literature its online publishing division in Hong Kong, where shares close to doubled, at the initial trading.

In a deal during 2017, Spotify took a stake of 9% in Tencent Music, and Tencent a stake of 7.5% in Spotify. That implied a value of $12 billion for Tencent Music. At the start of 2018, Tencent owned 62% of Tencent Music.

By far Tencent Music is the largest music streaming service in China and takes claim for helping to convert a market that was largely pirated into one in which a growing number of people will now pay for listening to music.

It also can take advantage of being accessed easily on Android, which operates the vast majority of handsets in China, and Apple devices through iOS. Spotify has yet to launch in China and Apple Music remains far behind.

In its present form, Tencent Music was established following a merger with China Music a rival streaming service in 2016. Since that time it has secured its leadership position through adding to as well as renewing deals with several international music groups such as Sony Music, Warner Music and Universal Music.

It also cemented deals with YG Entertainment in Korea and Huayi Brothers Music in China.