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Tencent Music insiders have to weigh whether to sell after slump
[NEW YORK] Now comes crunch time for Tencent Music Entertainment Group insiders and early backers who have to decide Monday whether or not to cash out of the Chinese music entertainment service when its 180-day lockup expires.
The decision is made more torturous by a 34 per cent decline in the stock since a peak in mid-March. For some insiders and pre-IPO investors, this is their first crack at offloading stock since the initial public offering priced at US$13 in early December. After almost reaching US$20 a share at the end of the winter, the stock now trades for only pennies above the IPO price.
The stock has gained a mere 1.5 per cent since its US$1.07 billion equity raise, the 10th largest IPO of 2018. But most of Wall Street still figures prospects are bright for Shenzhen, China-based Tencent Music. In its first financial report since going public, Tencent topped analysts' estimates. Half the 14 analysts covering the stock rate it a buy and the average price target of US$18 is 35 per cent above Thursday's close.
According to Bloomberg Intelligence, Tencent Music "is likely to remain the world's only online music-streaming platform that can generate sustainable profit" despite an uptick in content investments. And while peers such as Spotify Technology SA generate most of their revenue from paid subscriptions, analyst Vey-Sern Ling says Tencent Music "can monetise users more efficiently through the additional provision of social entertainment, including live-streaming and online karaoke."
Earlier this week, Loop Capital became the latest sell-side shop to weigh in, initiating coverage of Tencent Music's ADRs with a buy rating and US$19 price target, just below the Street's highest target of US$20.