At the close of its first day of trading on the Euronext Amsterdam stock exchange today (Sept. 21), shares of the Universal Music Group were up 36.5% over its initial reference price of €18.50, ending the day at €25.10 ($29.43) and giving the company a market capitalization of €45.51 billion ($53.36 billion).
The share price jumped immediately upon the opening of the exchange, to €25.25 ($29.61), and stayed relatively steady throughout the day, fluctuating between a low of €24.25 ($28.43) and a high of €26.45 ($31.01) before settling out just under where it started. Shares of former parent company Vivendi closed at €31.53 Monday; after spinning off the music conglomerate, shares dropped to €10.50 at the end of Tuesday on the Paris exchange, a decline of 66.7%.
UMG went public through a direct listing, not a traditional IPO, and so the Euronext Amsterdam established a reference price of €18.50 ($21.70) — giving the company’s market capitalization at €33.54 billion ($39.35 billion) — to guide buy and sell orders when trading began on Tuesday. Analysts believe UMG is worth far more, however, with most estimates exceeding $45 billion and three surpassing $50 billion. Morgan Stanley, which pegged UMG’s valuation at about $47 billion, called UMG “one of the best growth assets in European media.”
As digital music strengthened and asset values rose, Vivendi shareholders had urged the company to spin off UMG for years, the company wrote in its prospectus. Waiting paid off. Eight years ago, Vivendi passed on Japanese telecom giant Softbank’s $8.5 billion bid for UMG, then considered a generous amount. Music companies’ values have surged since then — first in the multiples paid for music publishing catalogs, then recorded music rights and eventually entire companies. Warner Music Group, purchased in 2011 for $3.3 billion, braved a tricky market and had a successful IPO in May 2020, raising $1.925 billion at a $15 billion valuation. Two music rights companies, Round Hill Music Royalty Fund and Reservoir Media, went public in November 2020 and July 2021, respectively.
In addition to UMG’s share price increase on the Euronext exchange, WMG stock also surged at the start of trading today on the Nasdaq exchange, up as high as 9.49% before settling back, still up 8.4% as of press time, perhaps reflecting an overall increased interest in record company stocks driven by the UMG news cycle.
Vivendi will distribute 60% of UMG’s common shares to its current shareholders and retain 10% for itself. It sold the remaining equity to a consortium led by Chinese tech firm Tencent, which purchased 20% in two installments for a total of about $6.6 billion, and hedge fund Pershing Square Holdings, which paid $3.95 billion for a 10% stake. (A small number of shares will accrue to some UMG executives.) Vivendi and Pershing Square intend to hold their shares long term, and the Tencent-led consortium is assumed to be long-term investors, too. The Bollore Group, at 18% Vivendi’s largest shareholder, will receive own 18% of Vivendi outstanding shares, leaving a float of 42% of outstanding shares — about 762 million — available to trade on the Euronext Amsterdam.
First-day trading volume was about 52 million shares — just 6.8% of the float, suggesting that supply and demand were out of sync. There will likely be more UMG shares on the exchange as more Vivendi shareholders opt to sell the shares they received from Vivendi. In comparison, about 35 million WMG shares, over 43% of the float, exchanged hands on their first day of trading. But in contrast, all of those WMG shares were sold by the sole owner, Access Industries.
“Today’s listing marks an exciting milestone in UMG’s storied history, reflecting our position as the world’s leading music-based entertainment company and our deep commitment to our amazing artists, songwriters and partners,” UMG chairman/CEO Lucian Grainge said at the open of trading today. “We offer our thanks to the team at Euronext Amsterdam for their work on this listing and look forward to a great partnership together.”