The world’s leading music company and second-largest music publisher was always going to generate hefty numbers in its stock market debut. After all, there’s a lot of money to be made in approximately 24.3% of licensed tunes around the globe. And in the wake of its monstrous IPO – Europe’s biggest this year, in fact – Universal Music Group is now worth over €46 billion (AU$74.4 billion).
Listing on the Euronext Amsterdam stock exchange, the label behind platinum-selling artists like Lady Gaga, Adele, Ariana Grande, Taylor Swift, Kanye West, Jay-Z, Justin Bieber, Queen, The Beatles, and plenty more surged by over a third in the opening minutes. Straight out of the gates with a reference price of €18.50, in relatively no time, the figure jumped to €25.61, hovering around this benchmark before settling at €25.25 by Tuesday’s close. Effectively, UMG recorded 38% growth on its first day of being publicly traded.
An operation of this calibre isn’t exactly short on cash. Assets aside, prior to the IPO, Universal Music Group was already valued at €33 billion (AU$53.3 billion). So why has it decided to list? Where others usually go public to raise capital, essentially, this was a manoeuvre to help French parent company Vivendi transfer ownership after 20 years of controlling UMG.
In the past few years, Vivendi has offloaded 20% of UMG to an entire consortium of interested parties led by Chinese entertainment conglomerate Tencent in two separate transactions (10% tranches). 10% was also sold to Bill Ackman, the billionaire CEO of Pershing Square Capital Management.
The Universal Music Group IPO represents another 60% of the company being shed, directing shares towards Vivendi shareholders as opposed to Vivendi the entity. As of the time of this writing, the latter retains a stake amounting to just 10.13%; which has left many puzzled about its strategy going forward given how UMG accounted for 75% of Vivendi’s profits. CNBC reports controlling shareholder Vincent Bollore is receiving a stake valued at €5.9 billion (AU$9.5 billion).
“Today’s listing marks an exciting milestone in UMG’s storied history, reflecting our position as the world’s leading music-based entertainment company and our deep commitment to our amazing artists, songwriters, and partners,” says Universal Music CEO Lucian Grainge, who will be enjoying a bonus of US$150 million in light of recent events as per the 306-page prospectus.
“We offer our thanks to the team at Euronext Amsterdam for their work on this listing and look forward to a great partnership together.”
As Universal Music Group hedges a sizable bet on the streaming era, with expectations the industry’s new modus operandi will boost royalty revenue as well as profits, there’s no telling how far this will go.