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Banks. A revenge-minded hedge fund billionaire. Chinese tech giant Tencent. Amsterdam's stock exchange.

That collection of plucky underdogs were the big winners Tuesday when Universal Music, the world's largest record label, began trading and immediately posted massive gains.

A Business to Beliebe In

Universal — which was spun off from French entertainment giant Vivdendi — represents cultural touchstones for boomers (Bob Dylan, The Beatles), millennials (Lady Gaga, Justin Bieber), and zoomers (Billie Eilish, DaBaby). The label has upped its sales for the last six years, and made €1.35 billion in profit in 2020 from €7.4 billion in revenue.

Universal has grown not just through streaming dollars from the likes of Spotify and Apple — which have brought annual recording industry revenue above $20 billion for the first time since 2004 — but also through deals with ad-supported sites like TikTok and Youtube. Investors see a golden hit:

  • Universal's market cap leapt to $55 billion on Tuesday, in the largest European listing of 2021. Individual shares were up 35% to about €25. That valuation represents a 25% premium over Universal's only listed competitor, Warner Music, as measured by a multiple of cash flow.
  • Universal expects at least 10% revenue growth this year and growth in the high single digits in years to follow.

Ackman's Revenge: China's Tencent, which led a consortium that bought a 20% stake, and Vivendi's controlling shareholder Vincent Bollore both hit paydirt yesterday. But if the day belonged to anyone it was hedge fund billionaire Bill Ackman. Ackman was humiliated in July when American regulators blocked him from investing in Universal via his special purpose acquisition company. So he grabbed 10% stake through his Pershing Square fund and is now sitting on 35% gain.

Dutch Delight: The other winners included the whopping 17 banks that advised on the IPO, as they'll make about $65 million in fees. And Euronext, the Amsterdam stock exchange that has attracted a record 15 IPOs including Universal in 2021, can point to today's debut as it vies for the title of Europe's post-Brexit financial capital.

By chance, Universal owns the rights to the most famous song about the Netherland's largest city — now let's hear Bieber try to croon like Jacques Brel.