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The music arm of tech giant Tencent Holdings <0700.HK>, which
plans to list either on the Nasdaq or the New York Stock
Exchange, set a placeholder amount of $1 billion for
registration purposes. Sources said last month it was hoping to
raise $2 billion.
With streaming apps QQ Music, Kugou, Kuwo as well as karaoke app
WeSing, Tencent Music is China's largest online music platform
boasting more than 800 million monthly active users.
It is often compared to Spotify Technology SA <SPOT.N>, but the
Chinese firm offers more in the way of socially interactive
services that makes it profitable while its Swedish counterpart
is not.
Music-centric social entertainment services, which include
virtual gifts and premium memberships, accounted for just over
70 percent of the $1.65 billion in revenue it made in 2017, its
filing with the U.S. Securities and Exchange Commission said.
Profit after tax came in at $199 million. The filing also showed
that only 3.6 percent of Tencent Music users pay for music.
For the first half of this year, revenue jumped 92 percent to
$1.3 billion while profits after tax climbed roughly fourfold to
$263 million.
By comparison, Spotify, with which it has a cross shareholding
deal, lost 90 million euros ($104 million) in the second quarter
of this year on revenue of 1.3 billion euros.
The number of Tencent Music shares to be sold were not disclosed
and potential valuations were unclear. Spotify is now valued at
$31 billion, with shares gaining about 8 percent since its U.S.
debut in April.
Chinese companies have raised $7.5 billion in U.S. markets so
far this year, the biggest amount since 2014, according to
Refinitiv data.
These include video streaming company iQiyi <IQ.O>, which raised
$2.4 billion, electric vehicle startup Nio Inc <NIO.N> which
raised $1 billion, and online group discounter Pinduoduo <PDD.O>
which raised $1.63 billion.
Tencent Music's IPO comes as the global music industry gets back
on track with more listeners streaming music through smartphone
apps compared to a few years ago when the market was dominated
by pirated music.
Its apps have over 20 million tracks from both international and
domestic music labels, the filing said, while millions of users
go to the karaoke app WeSing daily.
WeSing allows people to have karaoke parties in virtual singing
rooms, challenge each other in sing-offs and sing duets with
celebrities or other users.
Bank of America, Deutsche Bank, Goldman Sachs, JPMorgan and
Morgan Stanley are the lead sponsors of the deal.
(This story corrects headline, paragraph 2 to show U.S. exchange
not yet chosen.)
(Reporting by Julia Fioretti in Hong Kong; Additional reporting
by Aparajita Saxena and Diptendu Lahiri in Bengaluru; Editing by
Edwina Gibbs)
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