Entertainment, Industry, IPO

Tencent Proposes A Spin-off: Tencent Music To File A Separate US IPO

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Chinese social media giant Tencent has proposed a spin off to its online music entertainment business Tencent Music Entertainment Group through an initial public offering in the United States.

Tencent said it has submitted the proposal to Hong Kong Stock Exchange and has gained its approval to proceed with the spin-off, according to its security filing.

China Money Network previously reported that Tencent Music was seeking an IPO at an estimated valuation of US$10 billion.

In 2016, Tencent acquired a controlling stake in music streaming company China Music Corporation to create a dominant player in China’s online-music market. The deal valued China Music Corp. at roughly US$2.7 billion then.

China’s online music market reached RMB8.5 billion (US$1.28 billion), with 580 million users in 2017. The market is expected to grow to RMB10 billion (US$1.5 billion) with 670 million users, according to AskCi, a third-party data provider.

In 2017, QQ Music led China’s online music market, with a market penetration of 69.9%, followed by Kugou Music’s 68% and Kuwo’s 34.6%. Kugou and Kuwo are both owned by Tencent. Its competitors NetEase Cloud Music, Xiami Music (owned by Alibaba) and Baidu Music had market penetrations of 31.7%, 10.3% and 6.6% respectively, according to AskCi.

In March, Tencent Music joined Meituan-Dianping to lead a US$19 million series B round in Chinese mobile karaoke app KTVme.

The terms of the proposed spin-off, including offering size, price range and assured entitlement of Tencent Music securities for shareholders of Tencent, have not yet been finalized.


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