Tencent, Spotify in talks to swap stakes of up to 10% ahead of IPOs - report

Chinese internet group giant Tencent and Sweden’s Spotify are in talks to buy stakes of up to 10 percent in each other’s businesses ahead of their expected initial public offerings next year, the Wall Street Journal reported, citing sources familiar with the matter. The transaction would align the two services in future licensing negotiations with the major music labels and boost returns from the public listings, which are expected to value both in the billions of dollars, the sources said. Spotify has a higher valuation than Tencent Music Entertainment Group, which means Tencent would pay Spotify the difference in cash. The idea is for both parties to own an equal stake in each other’s music operations. 

Spotify began courting potential Chinese investors in pre-listing financing last year, but didn’t attract much interest because it has no plans to enter the Chinese market, the sources continued. Spotify declined to comment. The company was valued at USD 8.5 billion in 2015. 

Tencent Music had an estimated value of USD 6 billion last year after it acquired a controlling stake in China’s leading music-streaming service, China Music. People familiar with the matter say a recent round of financing valued the company at USD 10 billion. Tencent plans to take Tencent Music public next year to monetize its three music-streaming apps, other sources said, adding that the company is considering a listing in either New York or Hong Kong, with an initial public offering possible near the end of the first half of the year. 

Tencent’s music-streaming services -QQ Music, Kugou and Kuwo- have 700 million monthly active users across PC and mobile platforms, according to the company.