Tencent Music Moves Ahead With $1.2 Billion U.S. IPO

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The logo of the music streaming platform Tencent Music Entertainment (TME) is displayed on the screen of an iPhone on June 12, 2018. 

Tencent Music has firmed up its plan to set up shop on Wall Street, right on the heels of a (temporary) truce in the China-U.S. trade war. According to new filings with the Securities and Exchange Commission, the Chinese tech giant will seek to raise between $1.07 billion and $1.23 billion in a New York Stock Exchange IPO by year's end.

The Tencent Holdings subsidiary had originally planned to launch its American IPO in October, but delayed as fellow tech companies experienced global market selloffs. The $1.2 billion entry is significantly more conservative than the earlier reported $2 billion target, though the company never confirmed that figure.

The company said in the SEC filing that it is selling a total 82 million American depositary shares in this IPO, representing Class A ordinary shares of TME, at an estimated price between $13 and $15. At $1.2 billion, the IPO would make it the third largest by a Chinese company in the U.S. this year, behind iQiyi ($2.4 billion) and Pindouduo ($1.6 billion).

TME is targeting a valuation of between $22 billion and $25 billion, according to Reuters. By comparison, Spotify went public in April and has a market value of just over $24 billion.

The decision to move forward with an IPO this year -- an exact date was not announced though Dec. 12 has been reported -- follows an easing of tension between Tencent's home country and the U.S. Over dinner this past weekend, Presidents Donald Trump and Xi Jinping of China agreed to a 90-day "ceasefire" in their trade war, giving the two nations more time to find common ground and avoid costly increases in tariffs on products.

Tencent Music currently runs the four top mobile music apps in China by monthly active users, namely QQ Music, Kugou Music, Kuwo Music and WeSing. Combined, the four services have over 800 million monthly active users, according to the parent company’s F-1 filing. Tencent Holdings has a 58 percent stake in TME, while Spotify took 9.1 percent following a stock swap late last year. An earlier IPO filing also revealed that Warner Music and Sony Music purchased a total of 68,131,015 ordinary shares in TME, worth approximately $200 million.