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As Hollywood plots to restart film and TV production amid the novel coronavirus pandemic, the entertainment industry may be in for a wave of initial public offerings.
On June 3, Warner Music Group helped breathe life into the U.S. IPO market with the biggest debut of the year. The stock finished its first day above $30, more than 20 percent beyond its $25 IPO price, which had valued the company at $12.75 billion. The music major, which had filed for its stock listing in February but then delayed it, went ahead amid a market rebound and easing COVID-19 lockdowns.
That could help pave the way for more sector IPOs, particularly in streaming video, including from foreign companies seeking to tap the U.S. market. “For now, we are returning to some form of socioeconomic normality,” says Mark Mulligan, music industry analyst at MIDiA Research. “So from that perspective, there is good logic for why to IPO now.”
South Korean talent agency Big Hit Entertainment, the label of K-pop group BTS, filed for a preliminary review of a planned IPO at the end of May. And media conglomerate Vivendi has said it plans an IPO of its Universal Music Group, led by CEO Lucian Grainge, by early 2023.
“The global IPO market has been showing a growing amount of activity, though it’s still below where it otherwise would have been,” says Jay Ritter, an IPO expert and professor of finance at the University of Florida. The rise of streaming in the music space has improved its appeal to investors, Ritter notes: “Streaming revenue has changed the revenue for music companies from a declining growth rate to an increasing growth rate.”
Privately held firms that may try to test the waters for a public offering include billionaire Zhang Yiming’s ByteDance — parent of social media platform TikTok, which just installed Disney streaming chief Kevin Mayer as its CEO — as well as Endeavor, the parent of talent giant WME and modeling agency IMG. The Beverly Hills-based firm abandoned a planned IPO in September amid market headwinds but is seen by analysts as a possibility to eventually try again.
Some Wall Street observers even say Spanish-language media giant Univision, which had eyed a stock market listing before it was sold to an investor group led by former Viacom CFO Wade Davis in February, could in the coming years consider going public again.
“They could all benefit from having more cash and public shares,” explains Hal Vogel, CEO of Vogel Capital Management and a former entertainment industry analyst. That also could be appealing to companies seeking to grow via acquisitions.
Foreign streaming upstarts are also seen as likely IPO candidates. Matthew Kennedy, senior strategist at Renaissance Capital, a provider of institutional pre-IPO research, singles out Chinese video streaming platform Kuaishou, sports and entertainment site HUPU Sports Shanghai Media and Russian video streamer ivi.ru as candidates for offerings that could raise money for investments in content and growth initiatives.
Jeffrey Katzenberg’s shortform video service Quibi, which launched in April with $1.75 billion in funding and garnered 1.6 million subscribers to its free trial, has been mentioned as an IPO contender on Wall Street despite a rocky debut. Its financing is a “large enough sum for an eventual IPO, though they will first need to establish a successful track record for a few years,” Kennedy argues, underlining Quibi’s weaker-than-expected start.
A few analysts forecast that some music companies may see 2020 as the final chance to go public for a while. “Consider the maxim that it is always best to sell at the peak,” says Mulligan. “The full-year 2019 and first-quarter 2020 results for all of the record labels showed the first signs of significant slowdown in streaming growth. There is still plenty of growth left, but the rates are slowing. This may be a factor influencing the decision to float sooner rather than later.”
This story appears in the June 10 issue of The Hollywood Reporter magazine. Click here to subscribe.
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