Universal Music IPO Rakes In The Big Bucks

Universal Music Group IPO 1

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.

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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).

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“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.