Universal Music Group Stock Jumps in Market Debut

Lucian Grainge

Universal Music Group’s shares jumped in their stock market debut on Amsterdam’s Euronext exchange on Tuesday.

As of 9:10 a.m. Amsterdam time, the stock was trading at 25.74 euros ($30.19), giving the company a market capitalization of 46.67 billion euros ($54.7 billion), after opening at 25.25 euros ($29.61) and going as high as 25.775 euros. Late Monday, the stock’s reference price had been set at 18.50 euros ($21.70) per share, signaling a market value of around 39 billion euros. Compared to that reference price, the stock was up 39 percent shortly after 9 a.m. local time.

With the music powerhouse’s market listing, French media company Vivendi is cashing in on a bounceback of the music sector thanks to a boom in streaming revenue. With the music unit now trading separately, Vivendi shares were down 17.8 percent in Paris trading early on Tuesday at 10.71 euros ($12.55).

Universal Music Group (UMG) management, led by chairman and CEO Lucian Grainge, has touted the business momentum and outlook of the label home of the likes of Lady Gaga, Justin Bieber and Taylor Swift. The music firm was a key growth driver of Vivendi’s first-half 2021 results, with its earnings soaring 38 percent. UMG’s earnings of 753 million euros represented more than 70 percent of Vivendi’s total first-half earnings of 1.07 billion euros.

As such, UMG spin-off also means that Vivendi, led by CEO Arnaud de Puyfontaine, will lose its crown jewel. That is why analysts during a recent earnings conference call asked Vivendi management how it may support the company’s stock price. CFO Hervé Philippe has said that a stock buyback program was one option.

UMG management has said it was bullish on continuing its success by investing in artists, adopting new technologies and business models, as well as making ongoing revenue from subscriptions, including via deals with the likes of Spotify and Apple.

In the music spin-off, Vivendi said it was distributing nearly 60 percent of the share capital of UMG to Vivendi shareholders, while retaining a 10.13 percent stake for a minimum period of two years. Vivendi previously sold a 20 percent stake in UMG to a consortium led by Chinese online giant Tencent. Investor Bill Ackman then struck a deal to acquire up to 10 percent.

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