Universal Music dances to $ 55 billion for electric stock market debut

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  • Stocks jump nearly 40% in early trade
  • The highest European rating of the year
  • Registration is a coup for the Amsterdam exchange

AMSTERDAM, Sept.21 (Reuters) – Shares of Universal Music Group (UMG.AS) jumped more than a third when they debuted on Tuesday as investors bet a music streaming boom still has a long way to go.

The world’s largest music label, which represents musicians and catalogs of songs from Billie Eilish to the Rolling Stones and Bob Dylan, saw its market value jump to 47 billion euros ($ 55 billion) in the largest European rating of the year.

The company was split by the French Vivendi (VIV.PA), which sold 60% of Universal’s capital to its shareholders. Vivendi has seen its market value drop by two-thirds to around € 12 billion, according to data from Refinitiv, as it refocuses on other media assets like pay-TV brand Canal +.

Among the big winners of the Amsterdam listing are US hedge fund billionaire William Ackman and Chinese Tencent (0700.HK), alongside Vivendi controlling shareholder Vincent Bolloré, who retains large stakes in Universal. Read more

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.

Universal’s shares were trading at 24.97 euros at mid-session, up about 35% from their benchmark price of 18.50 euros. Shares of Bolloré (BOLL.PA), which owns 27% of Vivendi, rose 2.4%, while Amsterdam-listed shares of Ackman’s Pershing (PSH.AS) 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 (WMG.O), said analyst Matti Littunen of Bernstein. The two compete with Sony Music.

“No sign of a European discount here,” 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% stake through his main hedge fund Pershing Square, which now relies on a paper gain of over 30%.

The Universal Music Group (UMG) logo is seen in a building in Zurich, Switzerland on July 20, 2021. REUTERS / Arnd Wiegmann / File Photo

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BEATLES IN BIEBER

In the midst of 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 streamers run by Spotify.

“I 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,” 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 has 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 Lagardère, paving the way for a possible full takeover of the owner of Paris Match magazine. Read more

Universal has increased its sales for six consecutive years, with a basic profit of 1.36 billion euros in 2020 on a turnover of 7.43 billion euros. He forecast revenue growth of at least 10% this year and single digits thereafter. Read more

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.

($ 1 = 0.8522 euros)

Reporting by Toby Sterling in Amsterdam, Sudip Kar-Gupta, Gwenaelle Barzic, Mathieu Rosemain in Paris and Pamela Barbaglia in London Writing by Ingrid Melander and Sarah White Editing by Mark Potter and Pravin Char

Our standards: Thomson Reuters Trust Principles.

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