This article was originally published on October 2, 2018.
New York
CNN Business
—
Tencent Music has announced plans to go public in the United States, potentially becoming one of the largest IPOs by a Chinese firm in recent years.
The company has set a preliminary target of $1 billion, which could place its valuation between $25 billion and $30 billion, as per its SEC filings.
If successful, this IPO would rank as the third largest Chinese IPO in the U.S. since early 2018, following iQIYI’s $2.3 billion and Pinduoduo’s $1.6 billion offerings, according to data from Dealogic.
Tencent Music leads the music streaming sector in China through its platforms similar to Spotify. According to its SEC filing, the company boasts over 800 million monthly active users on its music apps. Notably, Spotify holds a 9% ownership interest in Tencent Music.
For the first half of 2018, Tencent’s entertainment division reported a profit of $263 million and total revenues of $1.3 billion.
The company stated in its filing, “We are at the forefront of transforming how people experience online music and music-focused social entertainment services,” and forecasted that paying users for music in China could “increase more than fourfold between 2017 and 2023.”
Tencent Music is expected to use the ticker symbol TME; however, it has not finalized its choice of listing venue, contemplating either the Nasdaq or the New York Stock Exchange.
CNN first reported Tencent Music’s consideration of a U.S. IPO in July.
This potential IPO comes on the heels of several significant listings by Chinese technology firms, such as Xiaomi and Meituan Dianping.
On October 2, 2018, Tencent Music announced plans to go public in the United States, potentially marking one of the largest recent initial public offerings (IPOs) by a Chinese firm. The company proposed a placeholder target of $1 billion in its filing with the Securities and Exchange Commission (SEC), which could place its overall valuation between $25 billion and $30 billion. Should this target be met, it would represent the third-largest IPO for a Chinese company in the U.S. so far in 2018, following significant listings from iQIYI, which raised $2.3 billion, and Pinduoduo, which garnered $1.6 billion, as reported by data provider Dealogic.
Tencent Music is a leader in China’s music streaming sector, operating applications that have garnered over 800 million monthly active users, akin to platforms like Spotify. In fact, Spotify owns a 9% stake in Tencent Music, highlighting the connection between the two companies. In its SEC filing, Tencent Music disclosed that it earned a profit of $263 million in the first half of 2018, with revenue amounting to $1.3 billion.
The company is optimistic about its growth trajectory, predicting a significant increase in the number of music-paying customers in China—a more than fourfold increase from 2017 to 2023. In a statement, Tencent Music emphasized its role as a pioneer in online music consumption and music-related social entertainment services, indicating a vision for expanding its user base.
While the trading symbol for the IPO would be TME, Tencent Music had not yet determined which exchange it would list on, with Nasdaq and the New York Stock Exchange being potential options. CNN Business had first reported in July 2018 that Tencent Music was contemplating launching an IPO in the U.S.
This announcement comes at a time when several Chinese technology companies have been entering the U.S. market with substantial IPOs. Recent examples include smartphone manufacturer Xiaomi and online service provider Meituan Dianping, which have also gathered substantial investor interest.
The potential IPO is significant not just for Tencent Music but also for the broader market, as it could signal continued investor confidence in Chinese technological and entertainment enterprises, despite the challenges these companies may face. The appeal of a large Chinese IPO in the U.S. highlights the complex relationship between China and America, especially regarding economic and technological collaboration and competition.
In summary, Tencent Music’s upcoming IPO emphasizes its dominant position in the Chinese music streaming industry backed by substantial user engagement and a profitable business model. The anticipated offering is poised to attract significant attention, reflecting ongoing interest in the burgeoning tech landscape of China and its potential for future growth in global markets.
