Tencent Music Now Aims to Raise $2 billion in US IPO

Chinese music-streaming company Tencent Music Entertainment Group has reportedly reduced the money it needs to raise for its initial public offering (IPO) in the US by half.

Three people with knowledge of the matter stated on Wednesday that Tencent Music, the subsidiary of Chinese tech firm Tencent Holdings Ltd., was now seeking to raise around $2 billion rather than the previous target of $4 billion in its US listing.

Tencent Music’s planned $4 billion IPO would have been the largest Chinese float in the US so far in 2018, beating the $2.42 billion IPO of online video platform iQiyi in March. The company at this time was aiming to achieve a valuation of about $25 billion.

The sources declined to confirm whether the now smaller deal related to a lower valuation or fewer shares to be sold. Tencent has refused to comment on the matter.

Two people familiar with the deal said the filing was submitted to the US Securities and Exchange Commission (SEC) on September 7.

Tapping Global Capital Markets

Tencent Music’s float came after the IPO of Swedish music-streaming service Spotify earlier this year, as the contribution of online streaming in the recording industry’s revenue grows bigger.

The rapid expansion in streaming music services in recent years has resulted to an upturn in the revenue of the global recorded music industry, which posted its third year of positive revenue increase in 2017.

Tencent Music currently runs three-quarters of China’s booming music streaming sector, operating music-related platforms QQ Music, KuGou, and Kuwo.

Tencent and Spotify arranged a share swap in December that saw the Shenzhen-based conglomerate take a 7.5 percent stake in the Stockholm-based group, including shares owned via Tencent Music, according to the prospectus filed by Spotify ahead of its IPO in April.

That agreement gave the company an implied valuation of $12.3 billion. Tencent Music’s valuation has risen rapidly over the past year,   

Tencent Music will be the latest in the list of Chinese companies to have tapped US markets this year.

Electric-vehicle startup NIO, which is backed by Tencent, has raised more than $1 billion in the previous year, valuing the company at around $5 billion, while shopping app Pinduoduo Inc. has raised $1.6 billion through its IPO.

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