The world’s largest music label saw its market value jump to $ 55 billion in Europe’s biggest list of the year.
Shares of Universal Music Group have jumped by more than a third when they debuted on the stock market, with investors betting that a music streaming boom still has a long way to go.
The world’s largest music label, which represents musicians and song catalogs from Billie Eilish to the Rolling Stones and Bob Dylan, saw its market value jump to $ 55 billion in Europe’s biggest list of the year.
The company was split by the French Vivendi, which sold 60% of the capital of Universal to its shareholders. Vivendi has seen its market value drop by two-thirds to around $ 14 billion, according to data from Refinitiv, as it refocuses on other media assets such as pay-TV brand Canal +.
Among the big winners on Amsterdam’s list are US hedge fund billionaire William Ackman and Chinese Tencent, alongside Vivendi majority shareholder Vincent BollorÃ©, who retains large shares of Universal.
The main beneficiaries of the Universal Music Group IPO and its valuation of $ 54 billion are Tencent, Vincent BollorÃ©, Pershing Square Holdings, Vivendi … and not a single artist. pic.twitter.com/1jDBtPWTFa
– LoÃ¯c (@loicmaestracci) September 21, 2021
Grainge will get bonuses
Universal chairman and chief executive Lucian Grainge will also receive sign-up bonuses which a source close to the company said is at least $ 140 million.
Shares of Universal were trading at $ 29.28 at mid-session, up about 35% from their benchmark price of $ 18.50. Shares of BollorÃ©, which owns 27% of Vivendi, rose 2.4%, while Amsterdam-listed shares of Ackman’s Pershing rose 4%.
At that price, Universal – the largest of the “big three” labels – is trading at a 25% premium over its only listed competitor, Warner Music, said analyst Matti Littunen of Bernstein.
The two compete with Sony Music.
âNo sign of a European discount here,â Littunen said in a note, adding that the stock’s performance would reduce pressure to seek a double US listing for Universal, which is based in Hilversum, the Netherlands, but whose headquarters are in Santa Monica, California.
The strong start is also justification for Ackman, who was forced into an embarrassing U-turn after US regulators blocked his plans to invest in Universal through his Special Purpose Acquisition Company (SPAC) in July.
Ackman, whose grandfather was a songwriter, opted instead to take a 10 percent stake through his main hedge fund Pershing Square, which is now sitting on a paper gain of more than 30 percent.
READ MORE: Bob Dylan sells his entire catalog to Universal Music
Shares of Universal Music Group have jumped by more than a third when they debuted on the stock exchange. The world’s largest music label has seen its market value on its Amsterdam list jump to nearly $ 55 billion. More here: https://t.co/7z5w62wWlg pic.twitter.com/tz4MZbZVv3
– Reuters Affairs (@ReutersBiz) September 21, 2021
Beatles to Bieber
Amid the streaming boom, Universal – whose other successful singers and catalogs include Justin Bieber and The Beatles – is hoping to build on deals with ad-supported sites like TikTok and YouTube as well as Spotify-led streamers. .
âI think we’re only at the start of the next wave of growth as music subscriptions and ad-supported consumption are increasing globally and have a long way to go,â Grainge told Reuters.
Part of Universal’s business derives from the rights attached to its huge catalog, and it also collects royalties for the artists it represents on social media platforms and performance fees each time their songs are played.
The Covid-19 pandemic has hit Universal’s live concerts and merchandising activities, but ad-supported revenue picked up after a jolt.
Its IPO carries high stakes for Vivendi, which is hoping to get rid of a conglomerate discount that it says has weighed on its shares.
Vivendi announced last week that it was about to acquire a new stake in LagardÃ¨re, paving the way for a possible full takeover of the owner of Paris Match magazine.
Universal has increased sales for six consecutive years, with 2020 profit of $ 1.6 billion on revenue of $ 8.71 billion. He forecast revenue growth of at least 10% this year and single digits thereafter.
The listing is Euronext’s latest victory in Amsterdam, which has grown as a financial center since Britain left the European Union. Before Universal, Amsterdam had attracted a record 14 IPOs this year.
The deal was handled by 17 banks which are expected to collect between $ 60 million and $ 65 million in fees advising Vivendi and Universal, BNP Paribas and other senior advisers taking the largest share, Refinitiv estimates.