Another Music Streaming IPO?
In the aftermath of Spotify’s direct list IPO last month there might be another digital music company getting ready to make an IPO play. This time Tencent, the Chinese streaming powerhouse, is considering going public. What’s crazy about this one is that just six months ago Tencent had an estimated market value of $10B. However today’s IPO rumors are floating in the $25B range – which would peg the company’s value in the same neighborhood same as Spotify.
There’s sort of a reverse logic situation going on with Spotify’s current market cap and Tencent’s potential valuation. Both companies’ values are derived from projected growth of new subscribers in new markets. So for both to keep growing they’d eventually have to start competing with one another in the same markets, right? Granted there’s a ton of runway left for new subscribers in foreign markets all over the globe, but at some point they’ll have to compete for listeners.
There’s also another interesting wrinkle in the Tencent IPO story. Both Tencent and Spotify are minority owners in one another. So they’re effectively double dipping from each other’s inflated valuations. Am I the only one who thinks this one feels weird?