Tencent to invest £162 million in Warner Music ahead of its initial public offering next week

Written by: Wajeeh Khan
May 30, 2020
  • Tencent to invest £162 million in Warner Music ahead of its initial public offering next week.
  • The Chinese internet giant also got a 10% stake in Universal Music Group in 2019.
  • Warner Music will be listed on Nasdaq under the stock ticker "WMG" on 3rd June.

The Wall Street Journal revealed on Friday that Tencent Holdings Ltd (HKG: 0700) is negotiating with Warner Music Group to get a stake in the entertainment company for £162.5 million. Warner Music is also scheduled to launch its initial public offering (IPO) in the first week of June. The news came only weeks after Tencent released an upbeat quarterly earnings report.

Tencent closed the regular session on Friday at £42.90 per share that marks an about 7% gain year to date in the stock market. Learn more about how to invest in the stock market.

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According to sources, Warner Music is committed to raising £1.46 billion in total. Along with Tencent, the American multinational company is also seeking other partners to contribute as anchor investors and hit the target more than £810 million in the first round of fundraising.

Warner’s IPO will be the largest in New York in 2020

Warner Music is currently the 3rd largest recording label across the globe with a portfolio that boasts prominent names like Bruno Mars, Ed Sheeran, and Cardi B. Its IPO is expected to be the largest in New York this year.

The Coronavirus pandemic that has so far infected a little under 1.8 million people in the United States and caused more than 100,000 deaths has brought the U.S IPO market to its knees. Warner Music had originally planned on going public in March but had to postpone as COVID-19 pushed the government into resorting to a nationwide lockdown. The pandemic, however, fuelled an 11% increase in streaming for Warner Music in the recent quarter.

Sources also confirmed that pricing for Warner Music’s public listing is expected on 2nd June. The company will be listed on NASDAQ under the stock ticker, “WMG”. The IPO is likely to value Warner Music in the range of £9.48 billion and £10.77 billion. The stock will be available for the public to trade on 3rd June.

Tencent and Warner Music have not made an official statement on the news so far.

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Tencent has a 10% stake in Universal Music Group

In late last year, Tencent also struck a deal with Universal Music Group that got it a 10% non-controlling stake in the entertainment company. Following the completion of the transaction Warner Music, Tencent will have a stake in 2 of the 3 largest recording labels of the world. Other than these two, Sony is the third label that Tencent currently doesn’t have a stake in.

Tencent’s performance in the stock market was reported upbeat with an annual gain of roughly 20%. At the time of writing, Tencent has a market cap of £410 billion and a price to earnings ratio of 38.52.