TLDR
- Universal Music Group stock dropped as much as 7.6% in early European trading Thursday
- Bill Ackman’s Pershing Square sold its entire UMG stake, valued at over $1.5 billion, booking an estimated $600 million profit
- The exit came shortly after UMG’s board rejected Pershing’s $65 billion takeover bid
- UMG bought back €250 million worth of its own stock from Pershing as part of an existing €500 million repurchase program
- Wall Street analysts still rate UMG a Strong Buy, with an average price target of $31.50
Universal Music Group’s stock fell sharply on Thursday after Bill Ackman’s Pershing Square sold its entire stake in the music giant, closing the door on a five-year ownership story that ended without a deal.
The stock dropped as much as 7.6% to 17.74 euros in early European trading, pushing its year-to-date loss to nearly 20%.
Universal Music Group N.V., UMGNF
Pershing Square’s exit, first reported by the Wall Street Journal, involved selling roughly 80.6 million UMG shares worth more than $1.5 billion. The fund is expected to walk away with at least $600 million in profit from the investment it first made back in 2021.
That initial investment came when UMG was still part of France’s Vivendi, before its spinoff and listing on Euronext Amsterdam.
The move followed a failed $65 billion takeover bid that Pershing put forward earlier this year. UMG’s board rejected the offer, saying it undervalued the company. Bollore Group, UMG’s largest shareholder, had also publicly opposed a deal.
UMG moved quickly to absorb part of the fallout. The company said it repurchased more than 14 million ordinary shares from Pershing Square funds for €250 million, at 17.66 euros per share — an 8% discount to Wednesday’s closing price.
The buyback sits under UMG’s existing €500 million repurchase program, which was already in place before Thursday’s events.
Market Reaction
The selloff appears tied more to ownership mechanics than any change in UMG’s underlying business. A high-profile shareholder exit can weigh on a stock, particularly when the market had been pricing in the chance of a larger strategic move.
ING analysts David Vagman and Maxime Stranart noted the departure sends a negative signal regardless of the circumstances. “The exit by a fan with such high visibility sends a negative signal of its own,” they wrote in a research note.
UMG’s buyback absorbed a portion of the selling pressure, but not enough to stop the broader market reaction.
Analyst View
Despite the drop, Wall Street’s longer-term view on UMG remains positive.
The stock holds a Strong Buy consensus based on seven analyst ratings issued over the past three months.
The average price target sits at $31.50, which implies upside of around 52% from current levels.
UMG’s roster includes artists such as Taylor Swift and Billie Eilish, and the company holds one of the largest music catalogs in the world.
At the time of writing, shares were trading down around 6% on the day following the early session lows.
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