Tencent Music Entertainment Group on Tuesday filed to go public in the U.S., kicking off what will likely be one of the biggest technology IPOs to date.


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Tencent Music Entertainment Group on Tuesday filed to go public in the U.S., kicking off what will likely be one of the biggest technology IPOs to date.

China’s largest music-streaming company, part of internet giant Tencent Holdings Ltd. TCEHY -2.26% , operates several popular apps including QQ Music and an online karaoke platform. It is benefiting from a broad boom in streaming that has reshaped the music industry, and its shares will hit the market during one of the hottest years for initial public offerings in recent memory.

The company recently boasted more than 800 million total unique monthly active users. It was created in mid-2016 after Tencent Holdings bought a controlling stake in China Music Corp. and combined it with Tencent’s existing streaming business. Tencent Music revealed sharp growth in its Tuesday filing, with revenue more than doubling in 2017 to $1.66 billion. About 70% of revenue came from its social entertainment services, including online karaoke, live streaming and sales of merchandise. It posted a profit of $199 million in 2017, up from roughly $2 million a year earlier.

It hasn’t chosen a listing exchange yet, people familiar with the matter said; it mentioned both the New York Stock Exchange and the Nasdaq Global Market in its filing.

A Tencent Music listing would be one of the largest IPOs of the year and is expected to raise billions in proceeds, people familiar with the matter have said. It could value the business in excess of $25 billion, which would make it one of the biggest tech IPOs to date, according to Dealogic. In late 2017, it was valued at roughly $12.5 billion when it swapped stakes with peer Spotify Technology SA. Still, valuations can fluctuate until a company prices its shares.

Tencent Music will be the second streaming giant to go public this year, following Spotify to market after the latter completed a direct listing in April. But the companies’ listening bases differ sharply: As of the end of June, Tencent Music boasted 644 million online-music mobile MAUs, 23.3 million of whom pay. That is many more listeners than Spotify, but far fewer who pay. Spotify had 180 million MAUs and 83 million paying subscribers as of the same date. Paying subscribers are typically much more important to streamers’ bottom lines than free users, whose value derives from showing them ads or converting them to paid subscriptions.

Tencent Music’s IPO plans come while its parent company’s shares have slid more than 20% in Hong Kong this year as it has grappled with increased government scrutiny. Days ago, the company announced a restructuring effort. Tencent Music would land in a hot IPO market in the U.S., where investors are hungry for sharp revenue growth. Through the third quarter, shares of companies that had listed publicly in the U.S. this year rose an average of 27% from their offering prices, while U.S.-listed tech IPOs were up 50%, according to Dealogic.

More than 180 companies raised over $50 billion in IPOs in the U.S. in the first three quarters, putting 2018 on track to be the busiest year for new issuance by both measures since 2014. Meanwhile, the music industry has been transformed by streaming: Global revenue from recorded music grew 8.1% in 2017, according to the International Federation of the Phonographic Industry—its third consecutive year of growth after 15 years of declines amid plummeting physical and digital sales.

The growth is almost entirely thanks to surging revenue from streaming, which jumped 41% last year and is now the single largest sales source for the industry.

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