Vivendi stock price exploded 20% today to print 19-year highs. Here’s why

Shares of Vivendi (EPA: VIV) closed the day almost 20% higher on Monday after the company said it will spin off Univer Media Group (UMG) in an $36.4 billion IPO.

Fundamental analysis: IPO to take place by the end of the year

The media conglomerate Vivendi said it will spin off UMG through an initial public offering by the end of the year. Universal Music Group is one of the three biggest record labels in the world, in addition to Warner Music Group and Sony Music. 

Vivendi made the announcement on Saturday, saying that the offering is set to take place on the Euronext NV exchange in Amsterdam. The conglomerate estimated the value of UMG at $36.4 billion.

Artists that collaborate with UMG include Taylor Swift, Lady Gaga, The Rolling Stones, Alicia Keys, Post Malone, Billie Eilish, Coldplay, and many others.

In the announcement, Vivendi also said it will distribute 60% of the record label’s share capital to existing shareholders. The French conglomerate holds 80% stake in UMG, while the remaining 20% is held by Chinese tech giant Tencent Holding, which doubled its stake in December 2020 for $3.7 billion.

Vivendi is expected to hold a special meeting next month to discuss and vote on corporate by-laws changes, after which transactions can take place. After that, there will be an additional vote to approve the spinoff and distribution.

Record labels are experiencing a corporate boom lately, helped by streaming music platforms like Spotify and Apple, as well as TikTok and Instagram, which license songs and allow users to publish them.

Technical analysis: Shares explode

Vivendi stock price soared about 24% initially on the news before settling to close at 31.22 euros or 19.62% on the day. This is the highest the stock traded since 2002.

Vivendi monthly chart (TradingView)

The buyers will now work to secure a weekly close above the previous multi-year highs around the 31.50 handle. This would create a base for the bulls to push towards the next target above the 36.00 mark.

Summary

French media conglomerate Vivendi plans to spin off its record label giant Universal Music Group in an IPO by the end of the year. Shares soared about 20% higher as a result.

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