Shares of Warner Music made their initial public offering (IPO) , but went down over 7% in their first day of trading even though they opened below Wall Street expectations.
Warner got $554 million from the IPO, but that is a fair amount short of its $750 million target. The shares opened at $17 after being expected to open in the $22-24 range.
It is speculated that concerns about the online music industry and its effect on record companies are what led to the immediate falling of Warner Music’s stock.
“When can you be confident that the growth in the digital side of the business will offset the declines in the physical business? No one has an answer to that question. And investors are responding accordingly,” said Fulcrum Global Partners analyst Richard Greenfield. MarketWatch says:
To stoke interest in the deal, insiders shifted 5.4 million shares of the IPO from their pockets into the company’s coffers.
The move appeared aimed at addressing criticism that the deal amounted to a big payout for Bronfman and his private-equity partners that carved out the firm from Time Warner (TWX: news, chart, profile) last year.
The market value of Warner Music has taken a dive from the $3.3 billion that was proposed to $2.4 billion. The IPO’s lead underwriters were Goldman Sachs and Morgan Stanley.
Nielsen Soundscan recently released data that showed an increase in album sales last year at a time when CD piracy is a big issue for record companies. Apparently this information didn’t help Warner Music’s stock too much.
Chris is a staff writer for Murdok. Visit Murdok for the latest ebusiness news.
