Tencent Music (NYSE: TME) stock has fallen by about 41% of its value since the start of 2021, prompting some investors to speculate on the causes of the slowdown and how important it is to long-term performance. of action.
At market close today, Tencent Music stock was worth $ 11.55 per share, a figure that reflects a 1.4% increase on the day. Nonetheless, TME has fallen north of 11% over the past week, around 24% over the past month, 56% over the past six months (stocks hovered around $ 30 each for most of the time. Q1 2021) and around 41% since 2021. start, as mentioned.
It should be noted up front that these stock price declines occurred despite the fact that the company – made up of streaming services QQ Music, Kugou Music, and Kuwo Music as well as karaoke app WeSing – reported a subscription. paying 42.6% year-on-year. increase (to 60.9 million premium accounts) in its first-quarter 2021 performance breakdown. Revenue grew 24% year-on-year over the same period, to $ 1.22 billion, according to the document , and the company’s second quarter 2021 financial statements are expected to be released on Monday, August 16.
Perhaps the most obvious contributor to the decline in Tencent Music’s share value is the threat of impending “antitrust” sanction from the Chinese government. A report released at the end of April suggested that the Chinese State Administration for Market Regulation (SAMR), after fining Alibaba a whopping $ 2.8 billion, would impose a fine of $ 1.5 billion on Alibaba. Tencent – and would order the company to sell several divisions of Tencent Music.
Subsequently, however, additional reports indicated that the conglomerate would not face a forced sale or a multi-billion dollar fine, instead paying close to $ 77,000 and, more importantly, relinquishing exclusive rights to some music. Shenzhen-headquartered Tencent Music has long touted its library of exclusive works, and divesting the rights to it may well affect its ability to attract subscribers and stay ahead of the competition. (By the way, SAMR has yet to announce Tencent’s penalty.)
Then Goldman Sachs downgraded Tencent Music in late March – in addition to executing $ 10.5 billion in block trades, selling $ 6.6 billion to Baidu, Tencent Music and Vipshop Holdings, according to Bloomberg.
Morgan Stanley – which had increased its stake in Tencent Music to nearly 100 million shares in February – also sold a significant portion of its stake in TME, which prompted Tencent Music to unveil a share buyback program of ‘a billion dollars. And more recently, Morgan Stanley analyst Alex Poon downgraded Tencent Music’s stock rating to “on par” and set a target price of $ 14 (from $ 23). The financial professional cited long-term revenue issues, the aforementioned loss of exclusive music licenses and slowing advertising revenue as the reason for the bearish stance.
Finally, the law firm Pomerantz announced in a recent statement that it is “investigating the claims on behalf of investors in Tencent Music.” While this release is relatively light on the details regarding the nuances of this investigation, it states that “the investigation concerns whether Tencent and any of its officers and / or directors have engaged in securities fraud or other illegal business practices “. The announcement follows the rejection in May 2021 of a separate investor lawsuit centered on Tencent Music’s IPO.