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Tencent Music seeks a quicker route to list in Hong Kong, joining exodus of New York-listed Chinese companies to safe haven amid US risks

  • Tencent Music would list its American Depositary Receipts (ADRs) by introduction, which is a quicker route to a secondary listing
  • Tencent Music’s fourth-quarter sales fell 8.7 per cent to 7.61 billion yuan, while profit plunged 55.3 per cent to 536 million yuan

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The New York Stock Exchange decorated for the trading debut of Tencent Music Entertainment on December 18, 2018. Photo: Shutterstock.
Georgina LeeandIris Deng

Tencent Music Entertainment said it is pursuing a secondary listing in Hong Kong, as the music streaming unit of China’s largest games publisher joins the flurry of New York-listed Chinese companies seeking safe haven from the looming risk of expulsion from US capital markets.

The Shenzhen-based company said it would list its American Depositary Receipts (ADRs) in Hong Kong by “introduction” – a process that makes them tradeable without raising new capital – to provide shareholders with “greater liquidity and protection” in an evolving regulatory environment, Tencent Music’s Executive Chairman Cussion Pang said in the company’s full-year earnings statement, without providing details.

The company is “working very hard” to obtain the necessary regulatory approvals and will continue to move forward “in an expedited manner,” Chief Strategy Officer Tony Yip said in a call with analysts on Tuesday, after reporting fourth-quarter and full-year results that matched forecasts.

Tencent Music is among the 240 Chinese companies that could be delisted under various US laws, including the Holding Foreign Companies Accountable Act (HFCAA) that came into effect in December. Five ADRs were put on a list on March 11 by the US securities regulator for being liable to HFCAA, which provides for the expulsion of US-listed companies if they don’t comply with US accounting inspectors for three consecutive years.

Tencent Music’s fourth-quarter sales fell 8.7 per cent to 7.61 billion yuan (US$1.19 billion), while profit plunged 55.3 per cent to 536 million yuan, driven by a 15 per cent drop in its social-entertainment business such as online tipping in live streams amid “increasing competition and changing macro environment.”

Sales at the online music business, the core of the company’s earnings, grew merely 4.3 per cent in the three months ended December, partly weighed down by a decline in sublicensing sales to competitors after Chinese regulators ordered the company to give up its exclusive rights.

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