Universal Music Group Shares Skyrocketing Market Debut

Santa Monica-based Universal Music Group rocks the Amsterdam stock market.

The world’s largest music label made its IPO on September 21 on the Euronext stock exchange with a market value of 47 billion euros, or $55 billion. This is the biggest European quotation of the year.

The music holding company’s share price jumped to $29.61 on Sept. 21, rising from a benchmark price set the day before at 18.50 euros, or $21.70, indicating a value valuation before the IPO of 39 billion euros. The shares ended at 25.25 euros, or $29.60.

French parent company Vivendi won shareholder approval in June to spin off UMG, which owns the rights to music by the Beatles, Lady Gaga, Justin Bieber and Taylor Swift.

Vivendi’s flagship investor, Vincent Bolloré, is expected to reap a huge salary from listing in Amsterdam. He owns about $7 billion worth of UMG shares after the market debut. And UMG chief executive Lucian Grainge would receive bonuses of up to more than $140 million.

Vivendi began divesting from UMG in March 2020 when Chinese conglomerate Tencent Holdings Ltd. paid $3.36 billion for 10% of its stakes. Tencent took another 10% from UMG in January.

Then, through two separate transactions in August and September, hedge fund investor and manager Bill Ackman’s UK investment trust, Pershing Square Holdings, acquired 10% of the company with investments of almost 4 billions of dollars. The hedge fund is now looking at a potential gain of more than 30% of its initial investment. In the meantime, Vivendi will distribute an additional 60% to shareholders and retain its remaining 10.13% stake for a minimum period of two years.

Even though the IPO generated higher-than-expected market activity for UMG, the market value of its former parent company fell by two-thirds during the IPO, to around $14 billion.

Vivendi is separating from UMG to refocus on its other media assets such as the Canal Plus pay-TV brand. Its divestiture successfully capitalized on a music industry explosion in streaming revenue.

UMG generated a significant portion of Vivendi’s profits from the first half of 2021.

The music giant generated $889 million from January to June, representing more than 70% of Vivendi’s revenue during that period.

UMG dominates the industry as one of the Big Three, alongside Sony Music Entertainment and Warner Music Group. It controls around 40% of the industry and its consistent success in producing stars and hit songs continues to attract new talent.

UMG derives much of its business from the rights attached to its massive catalog, which added Bob Dylan’s work in January for $300 million. The company’s ongoing challenge will be to invest in new musicians and songwriters with the full muscle of its marketing and distribution apparatus while providing the greater control and choice that has prompted industry players to signing up with smaller, digital-focused competitors.