TCEHY Tencent Holdings Ltd (PK)

By Maureen Farrell and Allison Prang 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 4, 2018).

After a two-month pause for market volatility, Tencent Music Entertainment Group is hitting play again on its plans for an initial public offering in the U.S.

The China-based music-streaming company, which is poised for one of the largest U.S.-listed technology IPOs on record by market valuation, has kicked off its roadshow to sell shares to investors, according to people familiar with the matter.

In a securities filing Monday, Tencent Music said it would aim to price its American depositary shares in a range of $13 to $15. At the midpoint of that range, Tencent Music would be valued at $22.9 billion on a fully diluted basis, according to Dealogic. That would make it the largest IPO by market cap to file in the U.S. since Alibaba Group Holding Ltd. went public in 2014.

Still, Tencent Music's potential valuation is below the $25 billion to $30 billion range it was initially targeting, according to a person familiar with the deal. Recent market volatility and a drop in technology stocks led the China-based music-streaming company to temporarily shelve its IPO, The Wall Street Journal reported in October. It has now scaled back its ambitions, both in its valuation and how much stock the company and its shareholders would sell.

The lower valuation comes as other, similar companies have also taken a hit. The tech-heavy Nasdaq Composite Index is down 8.2% over the past three months, and shares of Spotify Technology SA, another streaming service, have declined 26% over the same time frame.

Tencent Music's IPO would raise about $1.15 billion at the midpoint of its range, excluding an underwriters' allotment, according to the regulatory filing. Based on that midpoint, the company expects to reap about $544 million in proceeds, and the rest would go to the selling shareholders.

Still, people familiar with the offering said the company's overall strength is allowing it to still go public in a market where many companies have opted to wait.

U.S.-listed IPOs are currently up 9% from their offering price this year and U.S-listed tech IPOs are up 11%, outperforming broader market indexes, but IPO performance is still far below highs from earlier this year. U.S.-listed Chinese IPOs, by contrast, have struggled and are down 8% this year, according to Dealogic data.

Tencent Music is offering about 41 million ADS, according to its filing, and selling shareholders will offer an additional 41 million for which the company won't get proceeds. It filed in October to go public in the U.S.

The music service was created in mid-2016 after Tencent Holdings Ltd. bought a controlling stake in China Music Corp. and combined it with Tencent's existing streaming business. Tencent Music operates several popular apps, including QQ Music and an online karaoke platform.

Tencent Music said that in the third quarter of this year it had more than 800 million unique monthly active users. Its filing touted its "tremendous growth potential," citing a report that per-capita spending in China on recorded music is expected to more than quadruple from 2017 to 2023.

Write to Maureen Farrell at maureen.farrell@wsj.com and Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

December 04, 2018 02:47 ET (07:47 GMT)

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