Universal Music Group's shares have leapt more than a third in their stock market debut as investors bet a boom in music streaming still has a long way to run.
The world's biggest music label, which represents musicians and song catalogues from Billie Eilish to The Rolling Stones and Bob Dylan, saw its market value leap to $55 billion in Europe's largest listing of the year.
The company was spun off by France's Vivendi, which handed a 60 percent stake in Universal to its shareholders. Vivendi saw its market value drop by two thirds to about $14 billion, according to Refinitiv data, as it refocuses on other media assets such as pay TV brand Canal+.
Big winners from the Amsterdam listing include US hedge fund billionaire William Ackman and China's Tencent, alongside Vivendi's controlling shareholder Vincent Bollore, who are retaining large slices of Universal.
The key beneficiaries of Universal Music Group's IPO and valuation at $54B are Tencent, Vincent Bolloré, Pershing Square Holdings, Vivendi... and not one single artist. pic.twitter.com/1jDBtPWTFa
Grainge will get bonuses
Universal Chairman and CEO Lucian Grainge will also get bonuses linked to the listing that a source close to the company said would amount to at least $140 million.
Universal's shares were trading at $29.28 by mid-session trading, up around 35 percent from their reference price of 18.50 euros. Shares in Bollore, which holds 27 percent of Vivendi, were up 2.4 percent, while the Amsterdam-listed shares of Ackman's Pershing were up 4 percent.
At that price, Universal - the biggest of the "big three" record labels - trades at a 25 percent premium to its only listed competitor, Warner Music, said analyst Matti Littunen of Bernstein.
Both compete with Sony Music.
"No sign of a European discount here," Littunen said in a note, adding that the stock's performance would reduce pressure to seek a dual US listing for Universal, which is based in Hilversum, Netherlands, but has headquarters in Santa Monica, California.
The strong debut is also a vindication for Ackman, who was forced into an embarrassing U-turn after US regulators blocked his plans to invest in Universal via his special purpose acquisition company (SPAC) in July.
Ackman, whose grandfather was a songwriter, instead opted to take a 10 percent stake via his main Pershing Square hedge fund, which is now sitting on a paper gain of more than 30 percent.
READ MORE: Bob Dylan sells his entire catalogue to Universal Music
Universal Music Group shares leapt more than a third in their stock market debut. The world's biggest music label saw its market value in its Amsterdam listing leap to almost $55 billion. More here: https://t.co/7z5w62wWlg pic.twitter.com/tz4MZbZVv3
Beatles to Bieber
Amid the streaming boom Universal - whose other hit singers and catalogues include Justin Bieber and The Beatles - hopes to build on deals with ad-supported sites such as TikTok and YouTube as well as streamers led by Spotify.
"I believe that we're only at the beginning of the next wave of growth as music subscription and ad-supported consumption is scaling globally and has a long runaway ahead," Grainge told Reuters.
Part of Universal's business derives from the rights attached to its huge catalogue, and it also collects royalties for the artists it represents across social media platforms and performance fees whenever their songs are played.
The Covid-19 pandemic hit live concerts and Universal's merchandising business, but ad-supported revenues have picked up after a blip.
Its flotation carries high stakes for Vivendi, which hopes to rid itself of a conglomerate discount that it believes has weighed on its shares.
Vivendi said last week it was set to purchase another stake in Lagardere, paving the way for a potential full takeover of the Paris Match magazine owner.
Universal has increased sales for six years in a row, with core earnings of $1.6 billion in 2020 on revenue of $8.71 billion. It has forecast revenue growth of at least 10 percent this year and in the high single digits after that.
The listing is the latest win for Euronext in Amsterdam, which has grown as a financial centre since Britain's departure from the European Union. Before Universal, Amsterdam had attracted a record 14 IPOs this year.
The deal was handled by 17 banks which are expected to make a combined $60-$65 million in fees from advising Vivendi and Universal, with BNP Paribas and other lead advisers taking the largest share, according to Refinitiv estimates.