UMG Shares Set New 52-Week High But K-Pop, Tencent Losses Drag Down Music Stocks Overall

Universal Music Group (UMG) shares almost hit an all-time high on Friday, reaching 27.47 euros ($29.98) before closing at 27.22 euros ($29.21), a 1% increase for the week. That was close to the peak of 27.96 euros ($30.52) reached on Nov. 12, 2021, less than two months after the company was spun off from Vivendi, and marked a new 52-week high. The 1% gain followed a 6.9% improvement last week as investors reacted to news that the company expects to lay off staff in the first quarter. 

If French music company Believe is taken private, as has been reported, shareholders would expect a premium over the recent share price. That would explain why the company’s share price rose 13.5% to 10.18 euros ($11.11) this week — more than offsetting the 10.5% decline Believe shares experienced last week after news broke of the potential takeover. According to a Reuters report, Believe co-founder/CEO Denis Ladegaillerie and U.S. investment firm TCV have floated the idea to private equity firms. 

The S&P 500 rose 1.2% to close at a record high of 4,839.81 on Friday, surpassing the previous peak set two years ago. The Nasdaq didn’t set a record but fared even better, climbing 2.3% to 15,310.97. Stocks in other countries didn’t match the gains in U.S. markets. In the United Kingdom, the FTSE 100 dropped 2.1% to 7,461.93. South Korea’s KOSPI composite index fell 2.1% to 2,472.74. China’s Shanghai Stock Exchange Composite Index sank 1.7% to 2,832.28.

Music stocks were slightly off last week’s record high despite Believe’s double-digit gain and the majority of music stocks finishing the week in positive territory. The 20-company Billboard Global Music Index fell 0.4% to 1,559.48 this week, down slightly from last week’s all-time high of 1,566.45. Twelve of the 20 stocks had gains this week. Other than Believe’s takeover-related jump, the best-performing music stocks had only low, single-digit gains. MSG Entertainment rose 4.1% to 33.48 and SiriusXM improved 4% to $5.42. 

The index’s most valuable companies improved slightly: In addition to UMG’s 1% gain, Spotify improved 0.8% to $204.71 and Live Nation climbed 0.6% to $91.18. Those gains were overshadowed by losses by radio giant iHeartMedia, which fell 1.7% to $2.25, and three Asian companies: HYBE, SM Entertainment and Tencent Music Entertainment.

The index’s biggest losers were K-pop companies HYBE and SM Entertainment, which fell 10.9% and 10.3%, respectively. HYBE has been on a roller coaster in January, jumping 9.6% from Dec. 28 to Jan. 11 before falling 14.1% over the next six trading days. SM Entertainment jumped 20.5% from the end of December to Jan. 11 but has only dropped 3.4% from its high point. Another big mover this week was Chinese music streamer Tencent Music Entertainment, which dropped 9.5% to $8.51. 

There was good news for all companies on Friday when the closely watched University of Michigan’s Index of Consumer Sentiment jumped 13% in January, its highest level since July 2021. Over the last two months, consumer sentiment has risen 29% and Americans’ expectations for future inflation dropped to 2.9%. Consumer sentiment is now 60% above the all-time low from June 2022 but remains 7% below the historical average. 

Music companies will soon announce earnings results for the quarter ended Dec. 31. The first companies out of the gate are SiriusXM on Feb. 1 and Spotify on Feb. 6.