Tencent Music Announces a $1 Billion Stock Repurchase Program

Tencent Music IPO Launches at Lowest Expected Price Range
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After experiencing a per-share stock-price decline of about $12, Tencent Music has unveiled a $1 billion stock-repurchase program.

The Shenzhen-headquartered music company, which owns and operates the QQ Music, Kugou Music, and Kuwo Music streaming services as well as the WeSing karaoke app, recently announced the billion-dollar stock-buyback program in a formal release.

To recap, Tencent Music last week announced that it had finalized a new licensing deal with Warner Music – besides agreeing to establish a jointly owned record label in China – and reported seemingly solid Q4 2020 earnings and subscriber growth. On the latter front, the company said that the 56 million paid users it boasted as of December 31st represented a 40.4 percent year-over-year boost, whereas Q4 2020 revenue, at $1.28 billion, signified a 14.3 percent YoY increase.

Despite these developments, however, Tencent Music stock slipped substantially, falling from a high of $32 per share early Tuesday morning to as low as $16.51 per share Friday afternoon. TME then leveled out at approximately $20 per share, and at the time of this piece’s writing, its worth was up about one percent on the day, with shares trading for $20.36 apiece.

In terms of what may have caused the valuation decline, Goldman Sachs downgraded Tencent Music’s stock – and executed $10.5 billion in block trades, selling off $6.6 billion worth of Baidu, Tencent Music, and Vipshop Holdings stock in the process, according to Bloomberg. The multibillion-dollar move arrived amid reports of the Chinese government’s plans to begin accessing leading tech companies’ user data.

Plus, the SEC is taking steps to implement the HFCA Act, which will more closely scrutinize Chinese companies’ finances – and potentially remove the entities from stateside exchanges if they fail to comply with U.S. accounting standards.

Per Tencent Music’s brief release announcing the stock buyback, the board of directors approved a plan that would allow TME to “repurchase up to $1 billion of its Class A ordinary shares in the form of American depositary shares” between March 29th, 2021 and 2022. TME would fund the effort with “its existing cash balance,” and the board intends to “periodically” review the program, potentially adjusting its terms or size.

In other market news, indie publisher Reservoir Media is reportedly preparing to list shares following a merger with a (publicly traded) special purpose acquisition company. Anghami, the leading streaming service in North Africa and the Middle East, has also revealed plans to merge with an acquisition company, arriving on the stock market in the process.