VIVHY Vivendi SE (PK)

   By Mauro Orru 
 

Shares of Universal Music Group NV surged after the world's largest music company started trading on the Euronext Amsterdam stock exchange.

Early on Tuesday, Universal stock opened about 38% above its reference price of EUR18.50. The opening price would give the company a valuation of roughly 45.78 billion euros ($53.69 billion) based on about 1.8 billion shares outstanding.

This compares with a valuation of roughly $15.4 billion for Universal's smaller rival Warner Music Group Corp. when it listed on the Nasdaq exchange in June last year.

Universal, home to stars including The Weeknd, Billie Eilish, Post Malone and Taylor Swift, is hoping to cash in on a resurgent music industry lifted by the growing popularity of streaming services like Spotify and Apple Music, after years of declining sales.

The strong debut is a sign of investors' confidence in an industry that continues to benefit from consumers spending more time listening to music, a trend accelerated by the coronavirus pandemic.

Universal's listing prospectus had indicated an initial market capitalization of about EUR33 billion, based on the price paid recently for a 10% stake by Pershing Square Holdings Ltd., the investment firm controlled by hedge-fund billionaire William Ackman.

The listing marks an opportunity for Universal to increase its appeal both within the industry and among investors, who so far have had to invest in its owner Vivendi SE to get exposure to the record label.

Vivendi, the media conglomerate steered by the family of French billionaire Vincent Bollore, controlled 70% of Universal. Its shareholders backed plans in June to distribute 60% to existing Vivendi shareholders and list the company in the Netherlands.

Tencent Holdings Ltd. owns another 20% in Universal. The Chinese internet conglomerate doubled its stake last year in a deal that valued the business at about EUR30 billion, with the companies agreeing to work together to broaden opportunities for artists.

Universal, whose stable also includes classic acts such as The Beatles, Rolling Stones, U2, and Andrea Bocelli, owns more than 50 labels spanning all music genres.

The company is targeting revenue growth of more than 10% this year, with earnings before interest, taxes, depreciation, and amortization--a key profit metric for Universal--expected to grow more than 20%.

Universal's forecasts for the year signal confidence in the resilience of streaming even as coronavirus restrictions, which confined live concert audiences and everyday listeners to their own homes, subside.

The company believes streaming is still in its early days, with opportunities for further expansion driven by growth in the number of paid subscribers, even in established markets.

The music business's fortunes started to turn around in 2016, when growth from streaming services offered by the likes of Spotify Technology SA and Apple Inc. began to outweigh declining CD and digital download sales amid rampant online piracy.

The recorded music industry generated $21.6 billion in global revenue in 2020, with streaming accounting for 62% of the total, according to the International Federation of the Phonographic Industry, which represents the recording industry worldwide.

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

(END) Dow Jones Newswires

September 21, 2021 04:34 ET (08:34 GMT)

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