Shares in Warner Music Group ended the first day of trading today (May 11) on the New York Stock Exchange down 3.5% at $16.40, following a $554.2 million initial public offering at $17 a share.

Shares in Warner Music Group ended the first day of trading today (May 11) on the New York Stock Exchange down 3.5% at $16.40, following a $554.2 million initial public offering at $17 a share.

After opening at $16.60, the stock -- which is trading as "WMG" -- was down as much as 7.3% early on, hitting a low of $15.75 before fighting its way back. Struggles for the stock capped a day of reduced expectations for the company, which initially intended to raise as much as $750 million through the IPO.

Under the original plan filed with the Securities and Exchange Commission, WMG intended to sell 27.2 million shares at a range of $22 to $24 a share, with its private equity investors -- Thomas H. Lee Partners, Bain Capital, Providence Equity Partners and Edgar Bronfman Jr.'s Music Capital Partners -- selling an additional 5.4 million shares of the stock they control.

However, the deal was restructured just hours before pricing yesterday amid turbulence in the overall stock market, and criticism that the offering was priced too high. Jettisoned in the retooling of the deal was the $7 million in working capital that was supposed to be funneled back into the company.

In addition, WMG's investors were forced to readjust the size of a special cash dividend collected ahead of the IPO in order to cover the amount of money from the deal slated to go toward debt repayment.

The entire proceeds from the deal, along with some existing cash originally intended to go to investors in the dividend, are now being used to pay down $574 million in debt.

Under the revised plan, the investor group collected a one-time cash dividend of $100.5 million. As part of the payout, $7.2 million has been earmarked for 10 top Warner executives.
The investors were initially supposed to collect $141.5 million from the payout with $10.1 million going to executives.

Unchanged is a $73 million "termination fee" that investors will also collect for management services provided. The company will also pay $138 million to buyout the three-year option Time Warner held to repurchase a stake in WMG. Time Warner was given the option when it sold WMG last year.

WMG will also pay special one-time bonuses of $33 million to management and employees, including $10 million to all employees who had no equity stake in the company prior to the IPO.

At the close of the first day of trading, WMG had a market capitalization of $2.3 billion, below the $2.6 billion the investor group paid for the company last year. The group originally had been seeking a valuation of more than $3 billion from the IPO. However, the company's enterprise value -- which includes debt -- is higher, coming in at roughly $4 billion.