Tencent Music seems set for an October IPO and $30b valuation

Tencent Music Entertainment, the Chinese conglomerate which had 78% of the country’s legal streaming market in 2017, has already decided to have its IPO in the United States on Thursday, October 18, sources say.

Goldman Sachs and Morgan Stanley are underwriting the IPO at a value of $30 billion.

Tencent Music, the music division of the $480 billion Tencent empire, was only valued at $11 billion last December.

This jump is thought to be due to Spotify’s positive performance after its listing on the New York Stock Exchange in April, and increasing its value by 30% to its current $34.4 billion.

Sources in China say that Tencent Music will declare its filing with the US Securities and Exchange Commission on Friday, September 7.

It has been quietly working behind the scenes with the Commission since last month.

The IPO is expected to give Tencent Music the funds to buy more content for its streaming services, the three biggest in China.

They are QQ Music (254 million users in the first quarter of 2018), Kugou (227 million) and Kuwo (111 million).

In exclusive deals struck with Sony Music, Universal Music Group and Warner Music Group, Tencent gets to decide which songs rivals can stream.

Tecent Music has posted a 40% annual growth in recent times.

In its current form, it was established in 2016 after a merger with streaming rival China Music.

Tencent is seen as the Asian Spotify, while Spotify is regarded as the western version of Tencent.

They both have about a 9% stake in each other.

But while Spotify posted a net loss of  $1.4 billion last year, Tencent Music posted a profit of  $290 million although its turnover is half that of the Swedish company which is forecast for revenues of $6 billion this year.

While Spotify has converted 83 million of its 180 million users into subscribers (a 46% rate), Tencent has only translated 2%-3% (or between 14 million to 21 million) of its 700 million users into payers.

It faces a Chinese consumer market which expects its streaming for free, or will return to sourcing its content from pirate sites.

If Tencent’s IPO gives it a $30 billion valuation, Spotify’s share would be worth $2.7 billion – which would put it in greatest stead in the financial markets.

Its parent company Tencent has a market value of around $480 billion.

Tencent’s portfolio of digital companies includes the multipurpose messaging app WeChat, which has more than one billion users.