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Universal Music Soared in First Week as Public Company — What’s Next?

Universal Music Group’s first week as a public company was a resounding success for former owner Vivendi — which still owns a 10% stake — and UMG’s existing shareholders, Tencent and Pershing Square Holdings.  

Last Tuesday, on UMG’s first day of trading on the Euronext Amsterdam exchange, shares soared 43% above an 18.50 euros ($21.68) reference price set ahead of the listing, likely matched to Pershing Square Holdings’ purchase of a 10% stake in UMG at that same price in August.  

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Shares opened at 25.25 euros ($29.59) before peaking at 26.45 euros ($30.99) — a $56.2 billion market capitalization — and ending the day at 25.10 euros ($29.41). Over the week, the share price dropped slightly and traded from a low of 22.74 euros ($26.65) to 25.25 euros ($29.59). By Monday (Sept. 27), UMG’s fifth trading day, shares closed at 23.65 euros ($27.71), giving the company a 42.9 billion euros ($50.3 billion) market capitalization.  

The public listing’s success wasn’t a surprise, however.  Prior to UMG’s listing, most securities analysts that cover Vivendi believed the company was worth around 39 billion euros ($45.7 billion) to 42 billion euros ($49.2 billion), or roughly 21.50 euros ($25.21) to 27.15 euros ($31.81) per share. If UMG shares traded around those prices during the first week of trading, the company’s market capitalization — the total value of all outstanding shares — would have agreed with analysts’ calculations. Following the listing, five analysts who initiated coverage of UMG had an average price target of 27.50 euros ($33.22), 17% above Friday’s closing price.  

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Still, relatively few shares have traded hands thus far and UMG’s share price could swing as the market gains liquidity. Over the first four days, UMG’s trading volume was 75 million shares out of 1.8 billion shares outstanding and 756 million available for trading. (In comparison, when Warner Music Group went public in June 2020, its owner, Access Industries, floated 70 million shares. Trading volume on the first day alone was 35 million — half of all shares on the market.) A share price that remains well over 18.50 euros ($21.64) could entice far more of the new UMG shareholders to sell in the coming weeks. As a result, more shares on the exchange would help satisfy those investors who would like to purchase UMG shares but don’t want to inflate the price if supply is insufficient for demand.  

The aftereffects of UMG’s listing could be felt for years and transform who finances and owns rights to recordings and compositions. Since illegal file-sharing decimated the music industry in the ’00s, streaming and other licensing opportunities have driven a comeback over the past five years, reigniting investors’ interest in music and encouraging a slew of companies to go public. WMG and Round Hill Music Royalty Fund listed on the Nasdaq and London Stock Exchange, respectively, in 2020, and earlier this year Reservoir Media and Believe entered public markets.  

Now as other music companies consider going public, they’ll have UMG’s head-turning debut to point to before testing the waters. That’ll fund future acquisitions and give existing shareholders an exit plan — meaning more big paydays for executives and lucrative deals for rights holders.