Pershing Square Holdings, led by billionaire investor Bill Ackman, has initiated the process for a secondary listing of Universal Music Group (UMG) on a U.S. stock exchange. This strategic move aims to enhance liquidity and attract new investors. Under the agreement, Pershing Square must sell at least $500 million worth of its UMG shares by September 15, 2025. Ackman believes this listing will significantly boost demand and valuation of UMG shares, particularly from investors limited to U.S. exchanges. Additionally, it is expected to improve trading liquidity and analyst coverage for the company.

The decision follows tensions in Amsterdam's business environment, leading Ackman to express intentions to relocate both Pershing Square and UMG away from Amsterdam. Previously, Pershing Square delisted its own shares from Euronext Amsterdam in December 2023 due to concerns over local safety and regulatory issues. Despite these challenges, UMG maintains that Pershing Square has no right to require it to become a U.S.-domiciled company or delist from Euronext Amsterdam. The final decision on any actions beyond contractual obligations rests with UMG’s Board of Directors.

Strategic Move for Enhanced Investor Base and Liquidity

The push for a U.S. listing is part of a broader strategy to broaden UMG's investor base and improve trading liquidity. Ackman's investment firm has exercised its registration rights to catalyze the listing process, committing to sell $500 million worth of shares as part of this transition. This move is anticipated to attract significant interest from U.S. investors who are restricted to investing in securities listed on U.S. exchanges, thereby enhancing the overall market value and visibility of UMG.

Ackman highlighted that the U.S. listing would not only increase demand for UMG shares but also likely lead to greater analyst coverage. By waiving the 120-day filing requirement and extending the deadline to mid-September 2025, Pershing Square aims to provide ample time for UMG to complete the listing and offering in a manner that benefits the company and its shareholders. The move underscores the importance of aligning with market conditions and regulatory requirements to maximize shareholder value. Furthermore, analysts like William Packer from BNPP Exane anticipate that the U.S. listing could bring improved liquidity and potential index inclusions, which are crucial for long-term growth and stability.

Navigating Business Challenges and Strategic Adjustments

The decision to pursue a U.S. listing comes amid recent challenges faced by UMG. In 2024, the company's stock underperformed within the media sector, prompting a reassessment of subscription streaming's long-term growth potential. Issues such as slowing volume growth, DSP pricing narratives, and underwhelming ad-supported streaming performance from platforms like Meta, TikTok, and short-form video contributed to these challenges. However, with expectations rebased and a renewed commitment to executing its streaming 2.0 vision, UMG sees improved prospects for 2025.

The relationship between UMG and Pershing Square has seen several adjustments, including a reduction in stake from 10% to 7.6%. Despite these changes, UMG remains committed to maximizing value for all shareholders. The company's Board of Directors will analyze the best course of action to ensure optimal outcomes. Analysts predict that UMG will maintain its Amsterdam domicile while pursuing a dual listing strategy, balancing the benefits of international presence with local market stability. As one of the world's largest music companies, UMG continues to be a key player in the evolving media landscape, poised for significant growth and innovation in the coming year.