FAST NEWS: Tencent Music’s Hong Kong Shares Outshine New York in Trading Debut

The latest: Tencent Music Entertainment Group (TME.US; 1698.HK) listed on the Hong Kong Stock Exchange Wednesday using a method called “by way of introduction,” which does not involve issuing new shares. The stock is already listed in New York. Based on each American depositary share (ADS) representing two Hong Kong-listed shares, its opening price of HK$18 was slightly higher than the ADS’ New York Tuesday closing price, which was the equivalent of HK$17.98.

Looking up: During the listing ceremony, Chairman Cussion Pang said the company will strengthen support for original content and continuous product innovation, expand its innovative business ecosystem, and explore more music market development opportunities with partners.

Take Note: Tencent Music’s secondary listing status in Hong Kong means its shares aren’t eligible for trading by Mainland Chinese investors under the Hong Kong-Shanghai and Hong Kong-Shenzhen stock connect programs.

Digging Deeper: Tencent Music is China’s dominant online music services provider, formed by the merger of China Music Corp. and Tencent’s own digital music business in July 2016. It raised $1.07 billion in a U.S. IPO in late 2018. The company has faced troubles in recent years, including a 500,000 yuan ($72,000) fine last year for monopolistic practices. As a result of corrective actions to satisfy the market regulator, the company took a hit from the loss of exclusive rights to many of its titles through master licensing agreements with major record labels. Its revenue fell 15% and 13.8% year-over-year in the first two quarters of this year, respectively.

Market Reaction: Tencent Music closed at HK$18.22 at the midday break on Wednesday, 1.2% higher than the opening price of HK$18. Its parent company Tencent Holdings (0700.HK) fell 1.4% to HK$289.20, a new 52-week low.

Translation by Jony Ho

To subscribe to Bamboo Works free weekly newsletter, click here