Warner Music Group plans to sell 8.6 million shares of common stock at $41 per share on behalf of its controlling shareholder, Access Industries, the company announced Tuesday (Jan. 4). The offering is planned to take place Thursday and will raise about $351 million before underwriter discounts, commissions fees and expenses. WMG shares closed at $41.27 on Tuesday, down 3.9%.
Access Industries sold stock worth $1.85 billion in two previous Class A share sales: 70 million shares at $25 per share in the June 2020 initial public offering on the Nasdaq; and 2.3 million shares at $44 per share in Sept. 2021, according to company SEC filings. After the latest offering, Access will have recouped about two-thirds of its $3.3 billion investment in 2011 and still own more than 73.6% of WMG’s economic interest.
Because Access owns 100% of WMG’s Class B shares, which confer 20 votes to one vote per Class A share, it will have 98.2% of WMG’s voting interest after selling 8.6 million shares, according to the offering’s SEC filing. Because WMG is a “controlled company,” meaning a single party holds more than 50% of its voting power, it is exempt from certain requirements from Nasdaq corporate governance standards (e.g., a requirement to have independent board members). As a result, WMG investors have a limited ability to influence corporate matters such as mergers, stock sales or equity incentive plans. Thus far, however, WMG investors have little to complain about, as Tuesday’s $41.27 closing price is 65% above the $25 IPO price.
With record labels and publishers in heated competition for recorded music and publishing catalogs, WMG has used inexpensive debt rather than stock sales to raise money to purchase companies as well as recording rights and publishing catalogs. In just the last month, WMG has made two major acquisitions: 300 Entertainment for $400 million and David Bowie’s publishing catalog for $250 million, helped by the sale of $540 million of notes in November 2021. Separately, WMG’s October 2020 sale of $250 million of notes helped fund two acquisitions worth $338 million.
