Warner IPO hits low note

Warner Music Group’s high profile IPO raised about $554m for the music conglomerate’s private equity backers, well off the anticipated $750 million projection.

Warner Music Group (WMG) went public today, offering 32.6 million shares of common stock at $17 per share. The initial public offering raised about $554 million (€432 million), well below the anticipated $750 million (€585 million).

In early trading Wednesday, the stock fell 85 cents to $16.15.

WMG chairman Edgar Bronfman’s Lexa Partners led Thomas H. Lee Partners, Bain Capital and Providence Equity Partners in the transaction, buying WMG in early 2004 for $2.6 billion . The label has released records by Madonna, Green Day, Red Hot Chili Peppers and Metallica.

The share price was below the $22 to $24 price bandied about in the weeks leading up to today’s IPO, putting the company’s market capitalization at $2.4 billion (€1.9 billion), well below the anticipated capitalization of $3.4 billion (€2.7 billion).

Before the IPO, Warner planned to dedicate $7 million of the profits to the record company’s operations, with the remaining $574 million going to pay off debt. The company will reportedly pay the full amount towards the debt, possibly making up the difference with cash.

In addition, investors, who had originally planned to sell an additional 5.4 million shares for $125 million, reportedly held onto those shares. WMG made up the difference.

The already limited capital earmarked for WMG operations brought vocal criticism from one of the label’s most lucrative artists, hard-rock band Linkin Park. That band released a statement last week lambasting the label for cutting back on marketing and promotional budgets. The band also said they wanted out of their contract, having sold around 35 million albums worldwide, including around 18 million in the US. (See PEO special feature “Like a broken record.”)


Jimmy Page,
guitarist,
Led Zeppelin

Linkin Park also reportedly refused to play at this morning’s ceremony at the New York Stock Exchange, where former Led Zeppelin guitarist Jimmy Page performed.