Tencent Music — China’s dominant music streamer, with hundreds of millions of users spread across its family of apps — made its Wall Street debut on Wednesday, with shares surging 7.4 percent in its first day trading on the New York Stock Exchange.
Tencent Music, trading under the TME symbol, was listed at $13 per share for its initial public offering — coming in on the low end of its $13-15 per share projections. The IPO raised about $1.1 billion for the company. TME shares quickly increased when trading began on Wednesday, hitting a daily high of $14.75 per share before closing at $13.98 per share.
Despite entering the market at a harrowing time for investors — even pushing its IPO back from October to December to avoid some of the wreckage — Tencent Music still made a noticeable first impression. It closed the day with a market cap of roughly $23 billion — making it one of the biggest tech IPOs in recent years and putting it within striking distance of surpassing Spotify. For comparison, Spotify hit Wall Street earlier this year with a market cap of $26.6 billion at the end of its opening day; it closed Wednesday with a market cap of about $23.25 billion.
Tencent Music, a subsidiary of Chinese internet giant Tencent Holdings, has four apps under its umbrella, including freemium streaming service QQ Music and WeSing, an online karaoke platform. Combined, those platforms boast a whopping 800 million users.
“Our users are highly engaged, with each daily active user on average spending over 70 minutes per day on our platform in the second quarter of 2018,” the company said in an October filing with the Securities and Exchange Commission.
Another positive for TME: it’s profitable. In its SEC filing, the company reported a $199 million profit for 2017 and said it’s already well ahead of that pace for 2018, earning $263 million during the first six months of the year. Spotify, the dominant streaming service in the U.S., posted an unexpected $49 million profit when it reported its third-quarter financials last month. (Spotify owns a 9.1 percent share of TME, stemming from a stock swap last year.)
One challenge facing TME, which makes the bulk of its money from song downloads and ad sales, will be its ability to convert users into paying subscribers. The company said it had a 3.6 percent paying ratio during the second quarter of the year in its SEC filing, which it labeled “very low” in comparison to other online music services.