China’s Tencents Holdings to spin-off online music streaming business

Tencent Music aims to raise $4 billion in its U.S initial public offering (IPO), thus valuing the company at $25 billion.

On Monday, China’s Tencent Holdings Ltd, stated it intends to spin off and list its online music business in the United States.

Incidentally, Tencent Holdings Ltd is China’s biggest music-streaming company.

The strategic proposal could potentially impact U.S. national security concerns since the Chinese company could track the geo-location of U.S. soldiers during their tour of duty. It will be interesting to see how the Trump Administration handles this IPO.

For investors, the proposal underscored the revival of a once-flagging online music industry, as more listeners take to listening to streaming music through smartphone apps and comes in the wake of music labels continuing to battle piracy as they try to sign up more paying customers.

Earlier this year in April, Spotify Technology SA, the market leader in this segment, structured its listing such that it allows existing investors to sell directly to the public.

According to sources familiar with the plans, Tencent Music plans to raise $4 billion in its initial public offering (IPO) which will value the company at $25 billion.

According to details in its filings on Sunday, Tencent stated terms of the proposed spin-off, including offering size, price range and entitlement of Tencent Music securities for the company’s shareholders, have yet to be finalized.

The proposed U.S. listing will be a blow to Hong Kong’s ambitions of housing more tech companies in its bourse. Keeping this strategy in view the stock exchange has loosened listing regulations; however the new rules “do not yet allow corporate entities to benefit from weighted voting rights”.

Chinese smartphone maker Xiaomi Corp has recently raised $4.72 billion in its Hong Kong IPO.

In its market debut on Monday, Xiaomi’s shares dropped by 2.9%, underscoring the lack of investor appetite due to a variety of reasons.

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Categories: Creativity, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy

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