HONG KONG/TOKYO -- Tencent Holdings looks to repeat the successful U.S. listing of Spotify by spinning off its own streaming music unit and floating shares in the American market, according to a filing the Chinese internet group submitted to the Hong Kong Stock Exchange.
Media reports say the offering could value the unit at between $29 billion and $31 billion, though the price range and other terms have not been finalized. Tencent itself trades on the Hong Kong exchange.
Tencent Music, which operates three of China's most popular online music platforms including QQ Music, had more than 700 million active monthly users and 17 million paid subscribers at the end of last year.
Tencent appears unmoved by the Hong Kong exchange changing its decades-old listing rules this year to accommodate companies with dual-class stock structures, which create groups of investors with different voting rights. The bourse's move was seen as an attempt to lure tech unicorns whose executives prefer retaining greater control of the companies.
The disappointing market performance of newly listed tech companies may have also prompted Tencent to look beyond Hong Kong. Smartphone maker Xiaomi's shares fell below their offer price on their first trading day on Monday.
"It's a natural move for Tencent to choose U.S. exchanges over Hong Kong," said Harry Yuen, associate director at Oceanwide Securities in Hong Kong. Investors in the U.S. market are more prone to give a higher valuation if another company in the same sector already proved its value.
Spotify, which boasts four times as many paid subscribers than Tencent Music, debuted on the New York Stock Exchange in April. The Swedish company's shares have risen more than 30% since then, attaining a market capitalization of $31 billion.
Spotify owns 9% of Tencent Music, while the latter holds a 7.5% stake in Spotify.
Tencent chose to list its e-book unit China Literature in Hong Kong in November, raising $1.1 billion in an offering that was oversubscribed 625-fold by retail investors..
Yet shares of the Tencent-backed company have fallen in the past six months. Monday's close at HK$76.65 stands more than 30% below the stock's peak, though still higher than its offer price.