Tencent Music Officially Files for Its $25 Billion IPO — and Spotify, Warner Music, and Sony All Have Stakes

Spotify Officially Going Public on Wall Street on April 3
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You might call Tencent Music Entertainment the ‘Spotify of China’.  Just one big difference: Tencent is profitable.

Tencent Music Entertainment has officially filed for an IPO in the U.S., a widely expected move.  The Tuesday filing revealed a ticker symbol of ‘TME,’ and could be the largest Chinese IPO to date.  The symbol will apply to both the New York Stock Exchange and NASDAQ Global Market.

The streaming juggernaut is owned by Tencent Holdings, which owns a 58.1 percent in the company.  As mentioned earlier, Tencent Music is gunning for an IPO valuation in the $25 billion range.  Upper-end estimates peg the valuation at $30 billion, depending on how the wind blows on game day.

Just recently, Tencent Music drastically cut its funding goals, halving an initial target of $4 billion to roughly $2 billion.

Spotify holds a 9.1 percent stake, part of a broader ownership swap between the streaming giants.

But Tencent Music is a more diversified play, with properties including QQ Music, Kugou and karaoke app WeSing, among many others.

“We are pioneering the way people enjoy online music and music-centric social entertainment services,” the company stated in its SEC F-1 filing.

Another big difference?  Tencent Music is wildly profitable, at least compared to the wildly unprofitable Spotify. In the filing, Tencent outlined a profit of $263 million on revenues of $1.3 billion for six months period ending June 30th.  That equates to a profit of more than half-a-billion annually, though ironically, Spotify will likely end up with the bigger valuation.

Spotify, meanwhile, is tipping the scales with losses of more than $1 billion annually.

But that matters little to the major labels, who profited handsomely off of Spotify’s stock run-up.  Now, the same trick is being applied again — at least by Sony Music Entertainment and Warner Music Group.  According to Tencent’s prospectus, both companies have acquired shares for approximately $200 million in cash.

The labels will divide 68,131,015 ordinary shares of TME, according to the filing.  Universal Music Group, easily the largest major label, wasn’t mentioned in the prospectus.