'Fan walkout': Universal shares fall after report of Bill Ackman's stake sale

Shares of Universal Music Group, the world's largest music label, which records artists such as Taylor Swift, Kendrick Lamar and Bill Eilish, fell 5% after The Wall Street Journal reported that Bill Ackman's Pershing Square fund is selling its stake in the media holding. This comes after two failed attempts by the billionaire to take over the company and move the listing of its securities from Amsterdam to New York.

Quotes of Universal Music at the auction in Amsterdam on June 4, fell by almost 5% after it became known that the hedge fund Pershing Square sells the remaining stake in the media group. This was reported by WSJ, citing a Bank of America document. We are talking about a package of about 84.6 million common shares worth more than $1.5 billion.

Last year Pershing Square already sold $1.4 billion worth of Universal securities at a price of €26.55 apiece. This year, the company's capitalization has declined by 18%, and Ackman's fund is offering its remaining shares at a discount, according to a Bank of America document. Large package sales are usually conducted at a discount to the market price, the WSJ points out. It could be between 3% and 8% to the closing price of the previous day - Universal ended trading on June 3 at €19.

According to the publication's source, Pershing Square expects to generate at least $600 million in profits, including dividends, over its nearly five-year ownership stake in the music label.

Universal itself announced on June 4 that it had already bought back more than 14 million of its own ordinary shares from various Ekman entities for €250 million. The deal was part of an ongoing €500 million buyback program.

The news of Ackman's exit from the media giant came just days after Universal's board of directors rejected his takeover bid - not the first. The billionaire valued the company at $65 billion.

He first entered the music label in 2021, before Universal became a standalone public company, when Pershing Square acquired the stake at an average price of €18.27 per share. For the past two years, Ekman has advocated that the media group move its main share listing from Amsterdam, where its corporate headquarters are located, to New York. Universal's operating headquarters is in California. The billionaire insisted that on the European exchange, the company's stock trades at a significant discount to its domestic value and has limited liquidity.

Pershing Square announced in April that it intended to buy Universal. Its proposed deal called for the music company to merge with Ackman's other publicly traded entity, Pershing Square Sparc Holdings, and then move its listing to the U.S. But music label executives decided that the bid grossly undervalued Universal's business.

While Pershing's move comes as no surprise after Universal Music rejected the fund's offer, it is nonetheless bad news for the company, said ING Bank analysts David Wagman and Maxime Stranart. "The departure of a suitor with such a high level of publicity sends a negative signal in itself," the WSJ quoted them as saying.

12 out of 19 analysts covering the company's securities recommend buying them. Six of them have a neutral stance, and only one advises to sell.

This article was AI-translated and verified by a human editor