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China's Tencent Music raises nearly $1.1 billion in U.S. IPO

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By Reuters
China's Tencent Music raises nearly $1.1 billion in U.S. IPO
FILE PHOTO - Visitors are seen at a booth of Tencent Music Entertainment at the Beijing Music and Life Show in Beijing, China, May 7, 2017. REUTERS/Stringer/File Photo   -   Copyright  China Stringer Network(Reuters)

By Joshua Franklin and Julia Fioretti

NEWYORK/HONG KONG (Reuters) – China-based music streaming company Tencent Music Entertainment Group’s has raised close to $1.1 billion in its U.S. initial public offering (IPO) after pricing its American depositary shares (ADRs) at the low end of its indicated $13 to $15 per share range, a source said on Tuesday.

The IPO shows how companies are defying a bout of stock market volatility with flotations. It tops off a bumper year for U.S. listings by Chinese companies, with $7.9 billion raised prior to Tencent Music’s debut, Refinitiv data showed. That is the highest amount since 2014, the year of Alibaba Group Holding Ltd’s record $25 billion IPO.

Tencent Music’s U.S. IPO is the fourth largest among Chinese firms this year. Video streaming company iQiyi Inc leads with its $2.4 billion listing, followed by online group discounter Pinduoduo Inc at $1.6 billion and electric vehicle maker NIO Inc at $1.15 billion.

With streaming apps QQ Music, KuGou, Kuwo as well as karaoke app We Sing, Tencent Music is China’s largest online music platform boasting more than 800 million monthly active users. The firm is often compared with Spotify Technology SA, but offers more socially interactive services that make it profitable while its Swedish counterpart is not.

Tencent Music sold 41 million ADRs while existing shareholders sold a further 40.9 million, the source said, asking not to be identified ahead of an official announcement. The IPO gives the company a valuation of $21.3 billion.

Tencent Music declined to comment.

Tencent Music initially planned to launch the deal in October, but postponed because of a sell-off in global markets roiled by a U.S.-China trade war and fears of slowing global growth.

The final deal size is also smaller than the $3 billion to $4 billion that IFR, a Refinitiv capital markets publication, reported the firm had initially planned to raise in May. Tencent Music never confirmed fundraising figures.

One person close to the deal told Reuters the smaller figure was due to the company’s valuation falling as a result of market volatility.

Tencent Music reported a 244 percent profit jump for January-September to $394 million. By comparison, Spotify lost a net $520 million.

Bank of America, Deutsche Bank, Goldman Sachs, JPMorgan and Morgan Stanley are the lead sponsors of Tencent Music’s deal.

(Reporting by Joshua Franklin in New York and Julia Fioretti in Hong Kong; Editing by Sandra Maler)