Tencent Music plans to list in Hong Kong for a secondary listing in the form of introduction

New shares will not dilute the interests of existing shareholders. Its advantage lies in its high anti-risk coefficient. Tencent Music plans to go to Hong Kong for a secondary listing in the form of introduction. Tencent Music plans to go to Hong Kong for a secondary listing in the form of introduction 1

On March 22, Tencent Music Entertainment Group (NYSE: TME, hereinafter referred to as "Tencent Music") released its financial results as of December 31, 2021. According to the unaudited financial report for the fourth quarter and the full year, Tencent Music's total revenue last year increased by 7.2% year-on-year to 31.24 billion yuan, and the net profit attributable to the company's shareholders was 3.029 billion yuan, a year-on-year decrease of 27%. The profit decrease was mainly due to the decline in Internet advertising. , digital album sales restrictions and exclusive licensing restrictions are affected by many factors.

Tencent Music stated that in order to provide shareholders with greater liquidity and more protection in the ever-changing regulatory environment, it plans to make an introduction on the Main Board of the Stock Exchange of Hong Kong on the second floor of the Hong Kong Stock Exchange subject to regulatory approval. listed.

As of the close of trading on March 21, Tencent Music was trading at US$4.65, down more than 8%.

Planning for a secondary listing in Hong Kong

In the fourth quarter of last year, Tencent Music’s total revenue was 7.61 billion yuan, a year-on-year decrease of 8.7%; net profit was 577 million yuan, attributable to the company Shareholders' net profit was RMB 536 million, a year-on-year decrease of 55%.

In terms of business, in the fourth quarter of last year, Tencent Music’s online music service revenue increased by 4.3% year-on-year to 2.88 billion yuan, which mainly benefited from the expansion of paying users. In the fourth quarter of last year, the number of paying users of Tencent Music's online music service reached 76.2 million, an increase of 5 million from the previous quarter and an increase of 20.2 million from the same period last year.

The financial report mentioned that online music paying users achieved year-on-year and quarter-on-quarter growth and hit a single-quarter high, mainly benefiting from expanded sales channels and paying user loyalty and related services brought by high-quality content.

However, social entertainment services and other revenue in the eyes of the outside world as a "cash cow" fell 15% year-on-year to 4.727 billion yuan. The financial report mentioned that amid increasingly fierce competition and changing macro-environment, monthly active users and paying users of social entertainment services have declined year-on-year and month-on-month. The company is working hard to improve its competitiveness through continuous product innovation and establishing more vertical areas in social entertainment, such as audio live broadcast, international expansion and virtual interactive products.

The financial report also shows that in order to provide shareholders with greater liquidity and more protection in the ever-changing regulatory environment, Tencent Music plans to introduce it to the Stock Exchange of Hong Kong in the form of an introduction upon obtaining regulatory approval. Secondary listing on the main board.

Industry insiders told The Paper that listing on Hong Kong stocks through introduction can not only provide company investors with more choices of trading locations and more flexible trading times, but also do not dilute the interests of existing shareholders, which is conducive to Introducing more investors will be more beneficial to the company's long-term development.

May explore the "metaverse" in QQ Music

The financial report also shows that Tencent Music announced a US$1 billion stock repurchase in March 2021 The plan is more than half complete and will continue.

Tencent Music Executive Chairman Peng Jiaxin said: "Based on our confidence in the future development of the 'one body and two wings' strategy of content and platform, more than 50% of the US$1 billion stock repurchase plan announced last year has been implemented. , the remaining part of the plan will also be completed in 2022.” During the conference call, Tencent Music Entertainment Group CEO Liang Zhu revealed future business plans. He mentioned that QQ Music may APP explores the metaverse. Each user will have his own independent room and can put his own music in the virtual room. Friends can listen to the music when they visit. Tencent Music plans to go to Hong Kong for a secondary listing in the form of introduction 2

On March 22, Tencent Music released its 2021 financial report and plans to list it on the main board of the Hong Kong Stock Exchange in the form of introduction, subject to regulatory approval. Secondary listing.

The financial report also shows that Tencent Music’s US$1 billion stock repurchase plan announced in March 2021 has been more than half completed and will continue.

Tencent Music’s full-year revenue in 2021 was 31.24 billion yuan, a year-on-year increase of 7.2%. The net profit attributable to the company’s shareholders was 3.029 billion yuan, a year-on-year decrease of 27%. The profit decrease was mainly due to the decline in Internet advertising and the decline in digital albums. Sales restrictions and exclusive licensing restrictions are affected by many factors.

Secondary listing in the form of introduction

A person close to Tencent Music told the Economic Observer Network reporter that the characteristic of listing in the form of introduction is that it does not actively initiate fund-raising. He issued new shares without diluting the interests of existing shareholders. Its advantage is that it has a high anti-risk coefficient, can share geographical risks in one place, and can expand the investor base after a long trading period.

On March 22, the day Tencent Music announced its secondary listing, Conch Environmental Protection Company and Huaxin Cement Company also announced that they would be listed on the main board of the Hong Kong Stock Exchange in the form of introduction.

Previously on March 10, NIO also completed its secondary listing in Hong Kong through an introduction. Weilai said at the time that it currently had sufficient cash reserves and had no urgent financing needs in the short term. In addition, Financial OneConnect, a financial technology service provider under Ping An Insurance of China listed on the US stock market, has also submitted a preliminary prospectus for "introduction to listing" in Hong Kong.

According to Tencent Music’s financial report, as of December 31, 2021, the total balance of cash, cash equivalents, time deposits and short-term investments held by Tencent Music was 24.69 billion yuan.

Performance has been affected by multiple factors

Tencent Music’s main revenue includes membership, advertising and live broadcasting. Looking at specific performance, Tencent Music’s online music service revenue in the latest quarter was 2.88 billion yuan, a year-on-year increase of 4%. Social entertainment services and other revenue was 4.727 billion yuan, a year-on-year decrease of 15%.

Tao Ye, an analyst at Huatai Securities, predicts that Tencent Music will continue to face pressure related to advertising, digital album sales and copyright sub-licensing in 2022.

In July last year, regulatory authorities further regulated open-screen advertising, which to a certain extent restricted Tencent Music’s advertising space and unit price. The rectification of the fan circle launched at the end of August last year has also had a greater impact on the music industry. On August 25 last year, the Cyberspace Administration of China issued a document calling for further strengthening the governance of the "fan circle", proposing 10 requirements including canceling celebrity artist lists, strictly controlling celebrity brokerage companies, and strictly controlling the participation of minors.

It is clearly required not to induce fans to list or to induce fans to consume. Against this background, QQ Music, NetEase Cloud Music and other platforms have imposed restrictions on the repeated purchase of digital albums. Only one can be purchased by default. The sales of digital albums of some singers have been affected to some extent.

In terms of Tencent Music’s previously highly profitable social entertainment business, that is, the live broadcast business, the overall market growth rate will slow down in 2021, and it will face fierce competition from platforms such as Douyin and Kuaishou. Competition will cause a certain diversion of Tencent Music users. In Q4 2021, Tencent Music’s online music mobile monthly active users (MAU) were 615 million, a year-on-year decrease of 1.1%. However, its music membership payment ratio is increasing. There were 76.2 million paying users in Q4, a year-on-year increase of 36.1%.

Tao Ye, an analyst at Huatai Securities, believes that Tencent Music needs to innovate its monetization model in 2022 to accelerate growth again. Tencent Music plans to go to Hong Kong for a secondary listing in the form of an introduction 3

After the US stock market closed on March 22, Tencent Music Holdings released its 2021 and fourth quarter financial reports.

The financial report shows that Tencent Music’s revenue in fiscal year 2021 was 31.24 billion yuan, a year-on-year increase of 7.2%. Net profit attributable to ordinary shareholders was 3.029 billion yuan, a year-on-year decrease of 27.1%.

In the fourth quarter, Tencent Music’s total revenue in the fourth quarter was 7.61 billion yuan, a year-on-year decrease of 8.7%. Among them, the net profit attributable to shareholders was 536 million yuan, a year-on-year decrease of 55%. In terms of business, Tencent Music’s Q4 online music service revenue was 2.88 billion yuan, a year-on-year increase of 4%; social entertainment services and other revenue was 4.727 billion yuan, a year-on-year decrease of 15%. The once “cash cow” social entertainment business has also begun to decline.

As of December 31, 2021, Tencent Music’s online music paying users reached 76.2 million, a year-on-year increase of 36.1%. The payment rate reached 12.4%, higher than the 9.0% in the same period last year.

The financial report also shows that Tencent Music plans to be listed on the main board of the Hong Kong Stock Exchange through an "introduction form" upon obtaining regulatory approval. At the same time, Tencent Music’s US$1 billion stock repurchase plan announced in March 2021 has been more than half completed and will continue.

Tencent Music Entertainment Group was established in 2016 and went public in the United States in 2018. It owns four major music products: QQ Music, Kugou Music, Kuwo Music and National Karaoke. As of the closing of U.S. stocks on March 21, Tencent Music fell 8.1% to US$4.65 per share, with a total market value of 7.87 billion yuan, and the year-to-date decline has reached 27%.