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Tencent Music gets ready for IPO; valuation could cross $25 billion

After Spotify (SPOT) went public this year, its rival Tencent Music, the music streaming division of China’s largest company Tencent, now plans to become the second music streaming company to file its IPO in 2018. According to the Wall Street Journal, Tencent is set to cast investment banking advisors for going public before the end of next month. The public trading of the shares is targeted to happen by the end of 2018.

The stock sale is expected to value Tencent Music at greater than $25 billion. Although not confirmed, it is guessed that Tencent Music is looking at a U.S. exchange listing. U.S. rules allow management to hold control even after a majority equity sale, thanks to the provision of multiple share classes.

In 2017, when Tencent acquired a 7.5% stake in Spotify and the latter acquired a 9% stake in Tencent Music, the Chinese music company was valued at an estimated $12 billion. Tencent held about a 62% stake in Tencent Music at 2017-end.

The stock sale is expected to value Tencent Music at greater than $25 billion

Tencent Music was formed through a merger with China Music nearly two years ago and is currently the largest music streaming service in China. It also enjoys a strong competitive advantage in the country compared to Spotify and Apple Music as Spotify is yet to enter China while Apple Music is less popular in the Red Dragon country compared to Tencent Music.

Social media giant Tencent’s valuation stood at $580 billion in January. The company is also involved in gaming and making movies through its Tencent Games and Tencent Pictures businesses, with Tencent Gaming being the world’s biggest gaming firm in terms of market cap and revenue. The company’s online publishing business Tencent Literature made a stunning debut through its IPO in 2017 which saw its shares almost double in early trading.

Worldwide music revenues are said to have totaled $17.4 billion in 2017 with music streaming revenues amounting to $7.4 billion, reflecting a year-on-year increase of 39%. With the strong worldwide revenues forecasted in the music industry, the road ahead seems positive for Tencent Music.

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