Warner Music Group Inc rose in its trading debut after shareholders raised US1.93 billion in an upsized initial public offering, the biggest US listing this year.
Shares of the music label, initially priced at US$25, opened at US$27 at 11:52 am in New York, giving the company a market value of US$13.8 billion. They climbed as much as 23 per cent from the offering price, to US$30.85.
Warner owns record labels and a music publishing company whose catalogs include songs from contemporary pop stars Lizzo, Dua Lipa and Ed Sheeran, as well as classics from Prince and Neil Young. Warner is now the only one of the three major music companies to trade publicly as a stand-alone company. Universal Music Group and Sony Music Entertainment are both part of larger corporations.
The listing signals the renewed strength of US IPOs after a hiatus brought on by the pandemic. Another IPO, Pliant Therapeutics Inc, which develops treatments for fibrotic diseases, soared as much as 63 per cent in its Nasdaq debut Wednesday.
Entities controlled by majority owner Len Blavatnik and current executives sold shares. Warner Music itself won’t receive any proceeds, according to a filing with the US Securities and Exchange Commission. Blavatnik, through Access Industries LLC, holds Class B shares and retains about 99 per cent voting power in Warner Music after the offering, the filing shows.
Blavatnik acquired the company for US$3.3 billion in 2011, as the record industry was reeling from years of piracy and sluggish demand in the shift to online music consumption. But global record sales have climbed five years in a row thanks to paid streaming services Spotify and Apple Music.
Warner now generates about 70 per cent of its revenue from digital sources, and that share should grow over the next few years, according to Chief Executive Officer Steve Cooper. The company’s roadshow presentation included screenshots of quarantine concerts streamed on Instagram Live, as well as popular clips on TikTok, the video-sharing app.
“In mature and emerging markets, there’s lots of room for growth,” Cooper said Wednesday. Not only will streaming find new customers, but new apps including Peloton and TikTok are all using music as core building blocks of their business. “A couple of years ago, Peloton was a group of brightly dressed bikers,” Cooper said. “Now it’s an exercise platform.”
Warner Music and its shareholders delayed the IPO pricing by one day to avoid selling shares on “Blackout Tuesday,” when entertainers and celebrities called for online musical performances and related events to be cancelled. The idea was to show support for the protests across the US against police brutality.
“Out of respect for Blackout Tuesday, we moved the launch date, but bringing the train to a full stop was not possible,” Cooper said. “We did what we could to be respectful.”
Many musicians and music executives called on record labels to do more, such as investing money in social justice causes and sharing more profits with artists.
Warner Music and Blavatnik’s family foundation on Wednesday launched a US$100-million fund to support charitable causes related to the music industry, social justice, and campaigns against violence and racism.
The offering was led by Morgan Stanley, Credit Suisse Group AG, Goldman Sachs Group Inc, Bank of America Corp, Citigroup Inc, and JPMorgan Chase & Co. The shares are trading on the Nasdaq Global Select Market under the symbol WMG.
Existing investors earlier sold 77 million shares at US$25 apiece, above the midpoint of a marketed range. Its backers were earlier marketing a sale of 70 million shares at US$23 to US$26 each.