Tencent Goes With A Skinny IPO
Yesterday the Chinese music streamer Tencent launched its US IPO on the NYSE. They went out at a share price of $13, which was on the low end of their guidance range, and finished the day at $14.02. So it feels like they priced their stock correctly.
Interestingly, Tencent only released 8.4M shares which represents just 5% of their total equity. By limiting the amount of stock being sold, they were able to keep the share price stable and land at a $21.3B market cap at the end of day one. The only downside to selling such a small percent of their company is that they raised just $1.1B – this is peanuts by today’s digital IPO standards. Keep in mind Tencent Music is still a subsidiary of the Tencent mothership, which is a dominate media+digital conglomerate in China. So they probably didn’t actually need to raise cash through their IPO.
For those of you keeping track of the other major music streaming IPO of 2018, yesterday Spotify’s stock closed at $128 – which is just off their all-time low and 35% below their all-time high of $196. I’m guessing Spotify’s stock performance influenced Tencent’s decision to go skinny with their IPO.