What’s Behind Universal Music Group’s U.S. Stock Listing Plan?

What’s Behind Universal Music Group’s U.S. Stock Listing Plan?

Universal Music Group (UMG), the world’s largest label conglomerate, is planning a U.S. stock market listing in the near future, in addition to its current listing in Amsterdam. But is it a case of “Shake It Off,” to quote UMG star Taylor Swift, or a case of a “Perfect Duet,” to cite fellow UMG artist Ed Sheeran?

Wall Street analysts and investors will keep their eyes and ears open for possible updates from the UMG management team, led by chairman and CEO Lucian Grainge, in July 31’s latest earnings report or the following earnings conference call. If you’re sorting through the details of what is going on with the expected additional stock market listing, The Hollywood Reporter has a few answers on the who, why, when, and where.

Who is driving the U.S. listing and why?

Billionaire hedge fund manager and big UMG investor Bill Ackman first said in November that he wants to bring UMG shares to the United States, citing both financial and political factors.

Let’s start with the latter. In an X post late last year, Ackman mentioned “events in Amsterdam during the last 24 hours.” That was a reference to Israeli soccer fans who were beaten and injured in clashes in Amsterdam following a Europa League soccer tournament match between Israeli club Maccabi Tel Aviv and Dutch side Ajax Amsterdam. The following morning, authorities said five injured Israeli soccer fans were released from the hospital, with 20-30 additional people having been lightly injured. In total, 63 individuals were arrested, police said at the time.

Ackman, who is Jewish, vowed to seek approval from the board of his Pershing Square Holdings, in which he and his family own a 23 percent stake, “to eliminate its listing on the Euronext Amsterdam exchange” to focus on its second listing on the London Stock Exchange (LSE). “Concentrating the listing on one exchange, the LSE, and leaving a jurisdiction that fails to protect its tourists and minority populations combines both good business and moral principles,” he explained. “We can also save money and improve liquidity for shareholders to boot.”

The investor further signaled similar plans for UMG, writing: “I have also begun the conversation with UMG (on whose board I sit), which is domiciled in Amsterdam as well as listed there, about moving its domicile and its listing to the United States, which will offer similar as well as other highly material benefits.”

Added Ackman: “Pershing Square has a contractual right to cause UMG to be listed in the US. We will exercise this right.”

He then outlined the financial rationale for the move further. “UMG trades at a large discount to its intrinsic value with limited liquidity in significant part due to it not having its primary listing on the New York Stock Exchange (NYSE) or Nasdaq Exchange and not being eligible for S&P 500 and other index inclusion,” Ackman highlighted. “We are going to fix this.”

UMG, in a response, emphasized that “Pershing does not have any right to require UMG to become a U.S.-domiciled company or delist from Euronext Amsterdam.” But it acknowledged that Ackman has the right to request an additional U.S. listing.

The company has not detailed so far how many shares it will offer in the U.S. listing or at what price, but highlighted that it will not receive any proceeds from the sale of shares by selling shareholders.

On July 21, UMG said that it has “confidentially submitted a draft registration statement … to the U.S. Securities and Exchange Commission relating to a proposed public offering in the United States of the company’s ordinary shares held by certain shareholders,” reemphasizing: “The number of ordinary shares to be offered and the price range for the proposed offering have not yet been determined.”

However, the company has confirmed that Pershing has the right to request a U.S. listing “subject to a Pershing entity selling at least $500 million in UMG shares as part of the listing.”

Financial experts see the industrial logic behind a U.S. listing. U.S. equity capital markets are known as the largest and most liquid in the world. After all, companies listed in the country are typically covered by a range of analysts with a broad investor following. Accessing this liquidity through a listing is typically seen as an opportunity to boost shareholder value.

When and where is the U.S. stock listing expected?

The timing and location of a UMG U.S. stock market listing are still unknown.

“We will exercise this right and achieve a U.S. listing for UMG no later than some time next year,” Ackman promised late in 2024.

The music major has been working inside that timeframe. “UMG will use commercially reasonable efforts to launch an underwritten offering for the sale of certain shares owned by Pershing by Sept. 15, 2025, subject to regulatory approval and market conditions,” the company said earlier this year.  

But it also emphasized: “Any actions or decisions of UMG beyond those necessary to comply with its contractual obligations under the Registration Rights Agreement will be determined by the board of directors of UMG based on an analysis taking into account what is value maximizing and in the best interests of all the shareholders of UMG.”

In terms of where the stock would be listed, the answer is also not clear yet, but the two big names to decide between are the Nasdaq and the NYSE.

An Analyst’s View

Expect Wall Street analysts to weigh in on the U.S. listing plan more widely once more details emerge. TD Cowen analyst Doug Creutz shared some of his thoughts in a report early this year.

“Pershing is required to sell at least $500 million of its $3.4 billion ownership position (about 7.5 percent stake),” he highlighted. “While the entry of new shares into the market is normally an overhang, we think that the widening of the potential investor base from a U.S. listing will be more than an offset for share performance.”

Concluded Creutz: “The U.S. listing is expected to improve liquidity for the stock and allow investors restricted to purchasing shares in U.S.-listed companies to add UMG to their portfolios.”