Shares of the world’s largest music group company, Warner Music Group Corp. (WMG) fell more than 5% on the news that stakeholder Access Industries is exiting the company by selling off its entire 1.6% stake. Shares closed down 3.9% at $41.27 on January 4.
Secondary Offering by Access Industries
Access Industries and its affiliates will sell all of the Class A common shares of WMG to sole underwriter Morgan Stanley (MS) at $41 per share. This price represents a discount of 4.5% to WMG’s closing price of $42.95 on Monday. Morgan Stanley will sell the shares on the Nasdaq from time to time in the over-the-counter market.
Access Industries holds a total of 8,562,500 shares of WMG, which is approximately 1.6% of its current float. WMG’s stock fell on the news of potential equity dilution. WMG will not receive any proceeds from the sale, nor is it selling any of its own shares. The company currently has about 514.53 million shares outstanding, as of September 30, 2021.
Consensus View
Yesterday, Jefferies analyst Andrew Uerkwitz upgraded the stock to a Buy rating from Hold and also lifted the price target to $50 (21.2% upside potential) from $41.
Uerkwitz is optimistic about WMG’s digital streaming platform, which he believes is still in a nascent stage. The analyst added that the Street is underappreciative of the stock and that its capital structure is flexible for new investments. The analyst forecasts double-digit revenue growth for the next five years for WMG.
Overall, the stock has a Moderate Buy consensus rating, based on 9 Buys, 3 Holds, and 1 Sell. The average Warner Music Group price target of $49.45 implies 19.8% upside potential to current levels. Shares have gained 13.2% over the past year.
Hedge Fund Activity
TipRanks’ Hedge Fund Trading Activity tool shows that confidence in Warner Music Group is currently Neutral, as some of the top hedge funds decreased their cumulative holdings of the stock by 123,600 shares in the last quarter.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
