Music Royalties Inc.
Universal Music Shares Soar in Market Debut
Shares in world’s largest music company jump almost 40%
By Nick Kostov Updated Sept. 21, 2021 6:47 am ET
Shares of Universal Music Group NV—the music giant behind stars including Taylor Swift, Drake and the Beatles—surged in their trading debut, representing a strong vote of confidence among investors in a resurgent music industry.
The company’s stock rose 38% above a reference price set Monday evening by the Euronext exchange in Amsterdam, where Universal shares made their debut Tuesday. French media conglomerate Vivendi SE had for years teased a spinoff of Universal, the world’s largest music company.
Universal’s market value Tuesday topped 45 billion euros, equivalent to $52.8 billion. That is up from about €33 billion in August, when billionaire William Ackman bought a 10% interest through his Pershing Square Holdings Ltd. hedge fund.
Another big investor is a consortium led by Chinese tech giant Tencent Holdings Ltd. TCEHY 2.89% The group bought a 20% stake over two transactions in 2019 and 2020.
Mr. Ackman had initially planned to invest in Universal through a special-purpose acquisition company. He dropped that idea when the Securities and Exchange Commission said it wasn’t convinced the deal met the rules for such vehicles.
Vincent Bolloré, who controls Vivendi, separately holds an 18% stake in the music company following the listing. Shares in Mr. Bolloré’s holding company were trading 4% higher in Paris on Tuesday.
Despite Universal’s booming valuation—multiple times higher than just a few years ago—it is still below some of Wall Street’s highest estimates. JPMorgan analysts said ahead of the listing that they believe their base case value of €54 billion “will prove conservative.”
Analysts say Universal offers an attractive way for investors to participate in the music market. Competitor Sony Music Entertainment is accessible only as a small piece of Japanese conglomerate Sony Group Corp. , while Warner Music Group Corp. has less than 15% of its stock listed publicly and is controlled by billionaire Len Blavatnik.
The music industry has piqued the interest of the investment community as it has been growing quickly due to the rise of streaming on services such as Spotify Technology SA and Apple Inc.’s Apple Music. After a 15-year decline amid rampant online piracy, the music business’s fortunes started to turn around in 2016, when the growth from streaming services began to outweigh dropping CD and digital download sales.
Streaming now accounts for more than 80% of recorded-music revenue in the U.S. and more than 60% globally.
Vivendi shares, meanwhile, dropped more than 15% in midday trading in Paris after being briefly suspended at the open. The French company has kept a 10% stake in Universal following the listing, and its biggest units now include French pay-TV group Canal Plus, ad-holding firm Havas and publishing company Editis, as well as small divisions like videogame maker Gameloft.
Still, the Paris-based company added billions of euros to its coffers by selling stakes in Universal ahead of the listing, and it can now deploy those funds on acquisitions. Last week, Vivendi struck a deal to increase its stake in French media group Lagardère SA, which owns the publishing house Hachette, to 45.1%, indicating its intent to take over the entire company.
—Ben Dummett contributed to this article.
Write to Nick Kostov at Nick.Kostov@wsj.com