Photo Credit: Donald Wu
China’s Tencent Music announces a $1B bond offering amid serious top-line margin pressure, with a major drop in TME shares year-over-year.
Tencent Music Entertainment (TME), China’s leading all-in-one music and entertainment platform, has announced its public bond offering of $1 billion, consisting of $500 million of 5.050% notes due 2031 and $500 million of 5.650% notes due 2036. The notes are expected to be listed on the Stock Exchange of Hong Kong Limited.
The news arrives amid major top-line margin pressure, with a quarterly net profit drop despite a slight revenue increase. The company posted a Q2 revenue increase of 11.5%, though net profit fell by 31.9% year-over-year.
At a share price of $8.26, TME’s share price return fell 13.33% over the past 30 days and 53.75% year to date. Its three-year total shareholder return of 30.53% contrasts with a 65.4% decline over the past year. That suggests a slowdown in its recent momentum, despite longer-term holders continuing to see gains.
However, TME still faces notable risks aside from lower margin, including offline events and ongoing regulatory scrutiny in China that could weaken its bullish outlook.
The company says it intends to use the net proceeds from its bond offering for “general corporate purposes,” including refinancing offshore debt and share repurchases. Tencent expects net proceeds of around $991.9 million after underwriting discounts, commissions, and estimated offering expenses.
The 2031 notes were sold at 99.804% of face value, while the 2036 notes were sold at 99.638% of face value. Both were priced on September 3, according to a filing with the SEC, and will settle on September 10. They will mature on September 10 of their respective years.
J.P. Morgan Securities LLC, Goldman Sachs Asia LLC, and The Hongkong and Shanghai Banking Corporation serve as joint bookrunners on the offering. UBS AG Hong Kong Branch, Bank of China Limited, and MUFG Securities Asia Limited are joint lead managers.
TME has $500 million of 2.000% senior notes due 2030 still outstanding, which were issued in September 2020 alongside $300 million of 1.375% notes due 2025, which the company says have been “fully repaid.”
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