Shares in Warner Music Group stumbled out of the gates this morning following the company’s initial public offering of 32.6 million shares at $17 a share. After opening at $16.60 the stock, which is
Shares in Warner Music Group stumbled out of the gates this morning following the company’s initial public offering of 32.6 million shares at $17 a share. After opening at $16.60 the stock, which is trading as "WMG," was down in early trading hitting as low as $15.75; it has since fought its way back to the neighborhood of $16.
WMG last night set the value of its initial public offering at $554.2 million—well short of the $750 million it was initially hoping to raise. Proceeds from the deal and a series of related transactions in conjunction with the IPO will be used to pay down $574 million in debt.
WMG was originally expected 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 stock they control.
But the deal was criticized by analysts as being too rich and with the market unwilling to stomach the targeted price range of the transaction, the investor group last night scrapped plans to sell its shares and bumped up the number of shares issued by the company.
In addition, a cash dividend scheduled to be paid to WMG’s existing shareholders in connection with the offering, and other cash payments earmarked for the investors have been reduced.
Goldman, Sachs and Morgan Stanley are the joint global coordinators on the deal. Also taking lead roles in underwriting the transaction are Lehman Brothers, Deutsche Bank Securities, Banc of America Securities and Citigroup Global Markets.
The underwriters have an option to purchase up to 4.89 million additional shares at the initial public offering price within 30 days to cover over-allotments associated with the deal.