(Updates Jan. 11 story with share price reaction in paragraph 7)

LONDON, Jan 11 (Reuters) - The largest shareholders in Believe, the French music services company behind best-selling French artists such as rap duo PNL, have been exploring the possibility of taking it private, people familiar with the matter told Reuters.

The investors, who include the group’s CEO and founder Denis Ladegaillerie and U.S. investment firm TCV, have been sounding out interest from private equity firms over a bid for Paris-based Believe less than three years after its stock market debut, the sources said on condition of anonymity. The shareholders were working with advisers, two of the people said.

Swedish private equity group EQT is among those that held talks with the shareholders about Believe, which has a market capitalisation of 948 million euros ($1.04 billion), but ended talks last month, one of the people said. Permira was also in talks that ended last month, a second source said.

While a deal might not materialise, takeover talks are still ongoing, a third person said.

TCV declined to comment. Ladegaillerie did not respond to multiple requests for comment. A spokesperson for Believe had no immediate comment.

Ladegaillerie has a stake of around 12.4% and TCV has 41.1%, according to the company's website.

Shares in Believe spiked by almost 6% to 10.30 euros in early trade on Friday before paring gains. At 0835 GMT the shares were up 1.2%.

There have been several transactions in Europe in the past year in which shareholders have bought back public companies that have struggled to perform on the stock exchange.

EQT last August offered to buy outstanding shares in Suse, a German software group in which it owned a 79% stake, which is about half the valuation at which EQT listed the business in April 2021.

Believe's shares closed at 9.74 euros on Thursday, roughly 50% down from the price of its initial public offering.

Founded in 2005 by Ladegaillerie, Believe works with musicians and music labels to help build up their brand via social media and put their work on streaming music platforms. It mainly targets lesser-known singers outside the ranks of top global stars. ($1 = 0.9141 euro) (Reporting by Amy-Jo Crowley and Pablo Mayo Cerqueiro in London and Mathieu Rosemain in Paris Editing by Anousha Sakoui, Matthew Lewis and David Goodman )