Things are going from bad to worse for China’s tech companies…
One day after the biggest drop in Chinese stocks since February 2016 as the Shanghai Composite plunged by more than 5% overnight which resulted in nearly a third of Chinese publicly traded companies, or roughly 1000 stocks, halted limit down, on Thursday afternoon the WSJ reported that Tencent Music Entertainment Group is postponing its initial public offering until at least November “because of the turmoil in global markets”, hitting pause – potentially indefinitely – on what would be one of the largest IPOs in the U.S. this year.
According to the WSJ, the music-streaming company met with its underwriting team this week to discuss the price range Tencent Music would set for its hotly anticipated IPO, but they opted to wait several weeks over worries that the market turmoil would affect the pricing. Based on early conversations with investors, demand for the listing was expected to be strong, one of the people said, and Tencent Music was expecting a valuation between $25 billion and $30 billion – a valuation range that would have made the company one of the biggest tech IPOs ever.
Meanwhile, Tencent Music’s private valuation has soared in the past year: the firm was valued at $12.5 billion late last year when it swapped stakes with peer Spotify Technology SA.
The company was expected to kick off its roadshow to sell shares to investors next week and was expected to start trading the week of October 22; however that plan is now in limbo.
The IPO delay comes amid a sudden, sharp global market rout, which sent U.S. stocks sharply lower on Thursday, one day after the Dow industrials tumbled, led by falling shares of technology companies. The S&P 500 index has declined more than 5% so far in October, wiping out almost all of its YTD gains in just a handful of days.
Meanwhile, in an ironic twist, one of the companies to have been hit hardest is none other than Tencent’s parent, Tencent Holdings: the Chinese internet giant has been crushed recently by a record-breaking sell-off, which is got worse overnight with Thursday’s 6.8% rout bringing losses since late January to $252 billion – by far the biggest wipeout of shareholder wealth worldwide. The stock, which as Bloomberg notes is one of the most widely held in emerging markets, has tumbled for an unprecedented 10 straight sessions.
It …read more