In A Spotify World, What’s Tencent Music Worth?

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Morning Report: Spotify’s IPO went so well it will soon have company, but will the math stack up?

It’s IPO season! That means we have yet another potential debut to dig into, and Tencent Music is up.

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Yes, the company that pulled off an equity swap with Spotify is considering taking itself public.

That transaction, at the time, valued Tencent Music at around $10 billion. However, the Wall Street Journal now reports that the value of the Chinese company at the time of its share-exchange with Spotify was $12.5 billion, and that “recent private transactions” have valued the company at $25 billion.

According to Yahoo Finance, Spotify is worth $28.1 billion. That puts the companies values on par with one another if one is willing to stack an illiquid, private-market valuation against a fully-liquid, public valuation. Of course, we shouldn’t make such a comparison. We don’t know the scale of private-market sales that generated the $25 billion figure—if any material equity has traded hands at that price matters. However, the closeness in purported value makes for an interesting situation.

There are other reasons than private-market-illiquidity to be slightly skeptical of the $25 billion figure for Tencent Music. As Fortune’s Polina Marinova noted this morning, the Journal reports that “China’s entire music industry generated $480 million in revenue” in 2016 from both recorded and live music. That’s around 5.5 percent of the U.S. market.

So either Tencent Music’s revenue is majority derived from countries other than China, or I don’t understand its valuation. We’ll see when we have the numbers.

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