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Universal IPO sounds high note for music shares

Today's IPO sends a big vote of confidence from investors for labels, publishing, merch and livestreaming giant

By IQ on 21 Sep 2021

Universal Music Publishing Group offices in Santa Monica


image © Joy Kennelly

Universal Music Group (UMG) share price rocketed on its first day of public trading, putting the company’s valuation at €45.9bn ($53.8bn) – a third larger than the €33.5bn ($39.2bn) reference price former parent company Vivendi placed on the firm.

The appetite for UMG shares – JP Morgan describes UMG as a “must-own asset” and “undervalued” – continues a run of positive reactions for investment into key multinational music businesses.

In the live sector, Live Nation shares are currently trading at $86.98 (€74.22), not far from an all-time high of $93.44 in June, putting the company’s value at $19.56bn (€16.69bn). CTS Eventim shares, meanwhile, were trading at €61.66 ($72.31) each, valuing the Germany headquartered firm at €5.75bn ($6.74bn). Both listed companies have seen their share price weather the pandemic as investors bet on solid future returns.

“The long term deals with their artists and with streaming services give investors an easy-to-understand asset they can invest in”

In comparison to UMG, previously-floated Warner Music Group shares were $44.03 (€37.54) each, valuing the company at $22.6bn (€19.27bn).

According to music business economist Chris Carey, CEO Media Insight Consulting, the enthusiasm around UMG’s offering also comes down to the simplicity of the business model of record labels and publishing.

“Investors can put a value on predictable income,” he says. “The long term deals with their artists and with streaming services give investors an easy-to-understand asset they can invest in.”

As it sought to take advantage of the recorded music industry’s revival of fortunes due to increasing streaming, Vivendi distributed 60% of shares in UMG to its own shareholders, leaving it with 10%. A Tencent consortium owns 20%, Pershing Square Holdings Ltd owns 10%, and French businessman Vincent Bolloré’s Bolloré Entities owns 18%. The company was floated on the Euronext Amsterdam stock exchange.

Insiders say the rise in valuation was expected, as many felt Universal Music Group was undervalued.

While the majority of Vivendi’s business is in major brands in publishing, magazines, TV and film, and gaming, it’s maintaining an interest in the live sector through its ticketing company See Tickets, and promoter and booking agency Olympia Production.

UMG owns merchandising brand Bravado, and runs livestream events through VenewLive, a co-venture with UMG, Big Hit Entertainment and YG Entertainment. It says it ran hundreds of livestream events during the pandemic and plans to expand the brand further in the future.

Universal’s record labels include Capitol Music Group, Interscope Geffen A&M, Motown Records, Def Jam Recordings, EMI Records and Polydor. Its global publishing catalogue contains close to 4million titles, by artists such as ABBA, Adele, The Beach Boys, Justin Bieber, Dua Lipa, Bob Dylan and U2.

 


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