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Spotify-backed online music platform Tencent Music to go ahead with secondary listing in Hong Kong

  • A listing through way of introduction might help the company avoid giving a big pricing discount because of the current sluggish market, analyst says
  • Tencent Music’s secondary listing is expected to add much-needed momentum to the Hong Kong primary market along with Leapmotor’s IPO

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Tencent Music’s shares in Hong Kong will be fully fungible with its American depository receipts. Photo: Reuters
Iris Ouyang

Tencent Music Entertainment Group is pushing ahead with plans to seek a secondary listing in Hong Kong, joining other US-listed Chinese firms in hedging against the risk of delisting from American exchanges.

The New York Stock Exchange (NYSE)-listed company – which is controlled by Chinese social media giant Tencent Holdings and is backed by Swedish audio streaming firm Spotify – has proposed the listing of its class A ordinary shares by way of introduction on the main board of the Hong Kong stock exchange, according to exchange filings on Thursday.

Way of introduction allows companies to list their shares more quickly, without selling new shares or raising more funds. The existing shares of such companies are often widely held, so that there will already be an open market for their stock after the new listing, even without marketing arrangements by underwriters.

Tencent Music’s shares in Hong Kong will be fully fungible with its American depository receipts (ADRs), meaning that stock bought or sold in one market can be converted or sold in another.

The Exchange Square Complex, which houses the Hong Kong stock exchange. Trade in Tencent Music’s class A shares in Hong Kong will commence next Wednesday upon final approval from bourse operator Hong Kong Exchanges and Clearing. Photo: Bloomberg
The Exchange Square Complex, which houses the Hong Kong stock exchange. Trade in Tencent Music’s class A shares in Hong Kong will commence next Wednesday upon final approval from bourse operator Hong Kong Exchanges and Clearing. Photo: Bloomberg
Tencent Music’s secondary listing comes less than a month after China and the United States signed an accord granting the US Public Company Accounting Oversight Board access to Chinese audit data, giving hope to the market, which has seen billions of dollars wiped off Chinese stocks, and easing concerns about the mass expulsion of Chinese firms from US exchanges. Hong Kong is to host a meeting of auditing officials from both sides this month, but the meeting is not expected to resolve all issues.

“Tencent Music’s listing was planned much earlier, [so] it doesn’t hurt the company to move forward with the process,” said Alan Li, portfolio manager at Atta Capital in Hong Kong. A listing through way of introduction has the advantages of lower costs and a simpler process, he said, adding that the company could also avoid having to give a big pricing discount because of the current sluggish market.

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