Warner Music Group launches IPO, sets price at $25 a share
Warner Music Group on Wednesday began selling its stock at $25 a share, marking the largest initial public offering in the U.S. this year.
The New York-based company, which represents artists such as Ed Sheeran and Cardi B, increased the number of shares in its offering to 77 million, 7 million more than previously announced.
Shares trading under the symbol WMG rose 22% to $30.53 on Nasdaq on Wednesday afternoon.
The IPO signals a rebound in the music business, which has evolved to embrace the streaming revolution brought on by companies such as Spotify.
The IPO comes at a challenging time for the music industry, which has been hard hit by the COVID-19 pandemic, with many live events canceled or postponed. Music businesses such as Beverly Hills-based concert promoter Live Nation have taken a major hit as concerts and festivals have been scrapped due to the pandemic.
Even before the outbreak, the IPO market for entertainment companies was uncertain. Endeavor, owner of the WME talent agency, last year put off plans for its IPO.
Streaming businesses have weathered the fallout much better than others in the entertainment industry, as people look to amuse themselves at home.
Still, streaming has been affected by many people no longer commuting to work and the industry’s growth has shown signs of slowing down.
For that reason, the timing of the IPO was ripe, said Mark Mulligan, managing director of MIDiA Research in London.
“There is no doubt there is risk now but there is potentially more in waiting,†Mulligan said of Warner Music Group’s IPO. “There is widespread belief there will be a global recession hitting most economies, so waiting six months or waiting nine months [to list], then investor confidence could be lower than now. With a recession there is much more risk and much weaker investor confidence.â€
The major label’s decision follows a record quarter for the company as the recorded music industry has gained significant ground thanks to subscription services.
The IPO is expected to be a windfall for billionaire Len Blavatnik, who bought Warner Music Group for $3.3 billion in 2011.Today, it is the third-largest music company by market share.
Warner Music Group has enjoyed steady sales growth in recent years. In its fiscal year that ended Sept. 30, 2019, the company saw sales jump 12% to $4.5 billion, according to a regulatory filing. The company posted net income of $258 million that fiscal year.
The company said it will not receive funding from the IPO. Shares sold will benefit Access Industries, a group Blavatnik founded, and related stockholders, Warner Music Group said. It declined to comment on what Access Industries plans to do with the money.
Blavatnik and Accessare expected to recover his initial purchasing investment and then some, but will also retain control of the company.
Warner Music Group said last month that after its IPO, Access and its affiliates would hold 99% of voting power of its common stock.
Mulligan said the IPO was “about owners extracting value.â€
“It is a smart strategy, selling shares to create revenue for the owners and then not losing any meaningful control of the company,†Mulligan said.
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