Tencent Music Shares to List in Hong Kong Without Raising Funds

Filipe Pacheco, Bloomberg News

The Exchange Square Complex, which houses the Hong Kong Stock Exchange, in Hong Kong, China, on Wednesday, July 13, 2022. Hong Kong is likely to see more dual-traded companies shift toward primary listings in the financial hub as they seek inclusion in trading links with mainland China, according to the exchange's Chief Executive Officer Nicolas Aguzin. Photographer: Paul Yeung/Bloomberg , Bloomberg

(Bloomberg) -- Tencent Music Entertainment Group traded higher in Hong Kong’s exchange on Wednesday after a listing that didn’t involve selling new shares or raising funds.

The stock closed at HK$18.22 on Wednesday, having started at HK$18. Two class A shares in Hong Kong are equivalent to one American depository receipt in New York. The ADRs closed at $4.58 (HK$35.95) on Tuesday.

The Shenzhen-based company chose to debut in the Asian financial hub by way of introduction, a quicker and easier route for firms already listed elsewhere. The firm controlled by tech giant Tencent Holdings Ltd. is part of a growing group of Chinese firms choosing the method to list closer to home as escalating Sino-US tensions fuel delisting risks stateside.

According to terms of the listing, holders of ADRs will have the option to cancel their ADRs and receive equivalent class A shares in Hong Kong.

Volatile equity markets, high inflation and surging interest rates capped valuations worldwide for companies seeking to go public this year through traditional initial public offerings. As a consequence, there’s been a slump in proceeds raised in venues including New York, London and Hong Kong.

Tencent Music Is Latest Cashless Debut Coming to Asia: ECM Watch

Electric-vehicles producer Nio Inc. debuted in Hong Kong in March using the same process, and later began trading in Singapore via the method. US-listed platform for housing transactions and services KE Holdings Inc. and software-as-a-service firm OneConnect Financial Technology Co. took the same path earlier this year.

Tencent Music raised some $1.07 billion through a new share sale in New York four years ago, with the shares now trading about two-thirds below their listing price.

(Updates with closing price in second paragraph.)