Universal Music shares shed quarter of value on streaming concerns
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Universal Music Group logo is seen displayed in this illustration taken, May 3, 2022. REUTERS/Dado Ruvic/Illustration
July 31 (Reuters) - Universal Music Group shares shed a quarter of their value on Friday after the world's largest music company reported slower growth in subscription revenue, raising concerns about its streaming momentum.
The music label, home to artists including Taylor Swift and BTS, has been a major beneficiary of the shift to paid streaming. Its premium valuation rests on its ability to convert that position into steady subscription growth through price increases, subscriber additions and market-share gains, making the quarterly slowdown particularly unsettling for investors.
Subscription revenue growth slowed to 6.7% in the second quarter from 7.9% in the previous three months.
The selloff comes two months after UMG rejected a $64 billion takeover approach from Bill Ackman's Pershing Square, saying the unsolicited proposal undervalued the company.
The shares were trading down 25% at 1000 GMT, on track for their biggest one-day drop ever, wiping about €8.8 billion from UMG's market value to €26.6 billion.
Citi said in a note that UMG's quarterly revenue exceeded the broker's expectations, but adjusted core earnings were below its estimate.
The softer core profit reflected recorded-music revenue and repertoire mix, higher central costs and a small merchandising loss, Deutsche Bank said, though it added that improving market-share momentum late in the quarter could support third-quarter trends.
JPMorgan analysts also said subscription trends could improve in the second half of the year, as UMG's market-share momentum strengthens and release slate improves.
Shares in Vivendi, one of UMG's largest shareholders, dropped 18% in sympathy and were headed for their largest one-day slump since 2002.
(Reporting by Leo Marchandon in Gdansk, editing by Milla Nissi-Prussak)
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