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May 12, 2005

Warner Music Group's Share Price Disappointing On First Day of Trading

Yahoo:  Warner Music Group (trading under the symbol WMG) hit a sour note with investors yesterday on the first day of trading on the New York Stock Exchange. The IPO for 32.6 million shares were priced Tuesday night at $17 a share after it became clear the market felt the higher price was not justified, which was well below the low end of its expected range of $22 a share. Many feel that the market is just overreacting amidst concerns about the real impact that online music will have on the future of the recorded music business...Shares initially fell to $15.75 but ended at $16.40, making the company's market capitalization $2.35 billion, compared with the $2.6 billion Edgar Bronfman Jr. and private equity investors paid for the company nearly a year ago. The timing of the highly publicized dispute with rap-metal band Linkin Park probably didn't help the situation as the total amount raised in the IPO yesterday was $554.2 million (which was about $100 million less than what was expected)...

Fulcrum Global Partners analyst Richard Greenfield said, "When the vast majority of your sales are physical CD sales and the market is moving away from physical sales, your revenue model and how you alter your cost structure to adapt to that new revenue model are unknown." Year-to-date U.S. music sales fell 7.6 percent for the week ending May 8 from a year ago, according to Nielsen Soundscan, although Warner Music is outpacing the industry, falling only 2.6 percent in that time frame.

--Warner Music Stock Falls in 1st Trading Day

Posted by Todd in Companies | Permalink


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