Tencent Music Entertainment Group (TME) Accused of Misleading Investors
According to the complaint, in December 2018, Tencent Music completed its initial public offering (“IPO”) of 41,029,829 ADSs for $13.00 per ADS. In its official filings with the SEC, Tencent Music highlighted its “strong partnerships” with a wide range of music labels including Sony Music Entertainment, Universal Music Group, Warner Music Group, and others, assuring that its business competed within normal competitive conditions and that its sub-licensing was “in accordance with the terms of relevant master license and distribution agreements.” However, these representations were materially false and failed to disclose that Tencent Music’s exclusive licensing arrangements with major record labels were actually anticompetitive, which allowed Tencent Music to charge unreasonably expensive sublicensing fees, violating Chinese antimonopoly laws. Then, on August 27, 2019, Bloomberg reported that China’s antitrust authority was investigating the exclusive licensing deals between Tencent Music Group and the previously mentioned major record labels. On this news, Tencent Music ADSs fell 6.8% to close at $12.57 and have yet to recover.