WALL STREET TURNS UP ITS NOSE AT WMG IPO

Whoa—that didn’t turn out so well. After settling for a $17 share price amid rapidly diminishing expectations on the eve of its IPO launch, Warner Music Group was battered and bruised by the stock market in Day One of trading. At one point Wednesday, shares were as low as $15.75 before closing at $16.40, as investors cast a no-confidence vote on the #4 music group and on the industry as a whole.

To add some perspective here, three out of four IPOs wind up in positive territory on their launches. "The underwriter finds it a little embarrassing when the price falls," University of Florida professor Jay Ritter told Reuters. "In terms of ballpark numbers, on the first day of trading 15% of IPOs trade flat and 10% fall."

Roughly 19 million of the 32.6 million shares offered were traded yesterday, but at a price that was more than 20% below what the company had hoped for. That puts WMG’s capitalization at about $2.3 billion—$300 million less than Edgar Bronfman Jr. and his investment posse paid for the company 14 months ago. Struggling EMI, by comparison, is capitalized at $3.5 billion. The sale of those shares put $556 million in WMG’s coffers, but most of it will be going right back out to pay down its $2 billion-plus debt, although Bronfman has promised bonues to employees.

Naysayers say all WMG has done to increase its value up to now is to cut costs—largely in staff cutbacks—which is having the opposite effect in terms of the company’s ability to compete in the marketplace. How can WMG break acts, critics ask, when they're not spending the money it takes to find and market them?

By the way, WMG did manage to get somebody to play at the opening bell yesterday (Linkin Park had been the first choice, but that didn’t work out) as Jimmy Page offered “Whole Lotta Love.” In light of the day’s events, a better choice would’ve been “No Quarter.”