Tencent Music reportedly eyeing $25bn US IPO

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Chinese streaming giant Tencent Music is planning a 25 billion US dollar IPO later on this year, according to the Wall Street Journal. Such a valuation would be one of the biggest ever tech initial public offerings.

The Wall Street Journal’s report suggests Tencent is looking for potential banking partners for the IPO, which will likely take place on a US exchange in the second half of this year.

An IPO for Tencent Music would come hot on the heels of Spotify’s public listing earlier this month. The Swedish streaming service, which has 70 million subscribers worldwide, raised eyebrows by bypassing banks and directly listing and offering shares to investors.

Without financial underwriters providing security against volatility, Spotify banked on the popularity of its brand and saved millions of US dollars in business fees that a normal IPO would entail. The direct listing saw share prices open at 165.90 US dollars, valuing the company at 29.5 billion US dollars.

Tencent Music and Spotify agreed to swap stakes with each other last December, which saw the Chinese streaming platform take a 7.5 percent stake in Spotify, which then took a nine percent slive of Tencent Music in return.

A report by Questmobile and Jefferies last June found that Tencent Music had 526 million active monthly users, far outnumbering Spotify’s 140 million monthly users.

However, Spotify has far more fee-paying subscribers with 70 million users worldwide paying around 10 US dollars per month. Tencent Music, on the other hand, had only 15 million fee-paying subscribers as of June last year, with the most expensive user package costing only 120 yuan (18.40 US dollars) per year.

While investors clearly see music streaming platforms like Tencent Music and Spotify as the future for music consumers, significant question marks remain over their profitability. Spotify is yet to make a profit on its business model, despite raking in more than three billion US dollars in revenue from subscribers.

While Spotify has previously been reluctant to calls for change to its model, in recent years, it has boosted investment in original material, artist exclusives and podcasts.