Tencent shareholders get $16.4 bln windfall as JD.com stake given as dividend

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BEIJING/HONG KONG — Chinese language gaming and social media firm Tencent will hand a $16.4 billion JD.com stake as a dividend to its shareholders, weakening its ties to the e-commerce agency and elevating questions on its plans for different holdings.

Tencent stated on Thursday it should distribute HK$127.69 billion ($16.37 billion) value of its JD.com stake to shareholders, slashing its holding in China’s second-biggest e-commerce firm to 2.3% from round 17% now and dropping its spot as JD.com’s largest shareholder to Walmart.

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The proprietor of WeChat, which first invested in JD.com in 2014, stated it was the precise time to switch its stake, given the e-commerce agency had reached a stage the place it might self-finance its progress.

The divestment transfer comes as Beijing leads a broad regulatory crackdown on expertise companies, taking intention at their abroad progress ambitions and home focus of market energy.

“This appears to be a continuation of the idea of bringing down the walled gardens and rising competitors among the many tech giants by weakening partnerships, exclusivity and different preparations which weaken aggressive pressures,” stated Mio Kato, a LightStream Analysis analyst who publishes on Smartkarma.

“It may have implications for issues just like the funds market the place Tencent’s relationships with Pinduoduo and JD have helped it keep some competitiveness with Alipay,” he stated.

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JD.com shares plunged 11.2% in early commerce in Hong Kong on Thursday, the largest every day proportion decline since its debut within the metropolis in June 2020, earlier than recovering partially to a 7% decline by 0450 GMT. Shares of Tencent, Asia’s most precious listed firm, rose 4%.

The businesses stated they’d proceed to have a enterprise relationship, together with an ongoing strategic partnership settlement, although Tencent Government Director and President Martin Lau will step down from JD.com’s board instantly.

Eligible Tencent shareholders shall be entitled to at least one share of JD.com for each 21 shares they maintain.

PORTFOLIO DIVESTMENTS?

The JD.com stake is a part of Tencent’s portfolio of listed investments valued at $185 billion as of Sept. 30, together with stakes in e-commerce firm Pinduoduo, meals supply agency Meituan, video platform Kuaishou, automaker Tesla and streaming service Spotify.

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Alex Au, managing director at Hong Kong-based hedge fund supervisor Alphalex Capital Administration, stated the JD.com sale made each enterprise and political sense.

“There is perhaps different divestments on their means as Tencent heed the antitrust name whereas shareholders ask to personal these pursuits in minority stakes themselves,” he stated.

An individual with information of the matter instructed Reuters Tencent has no plans to exit its different investments. When requested about Pinduoduo and Meituan, the individual stated they don’t seem to be as well-developed as JD.com.

Tencent selected to distribute the shares as a dividend fairly than promote them available on the market in an try to keep away from a steep fall in JD.com’s share worth in addition to a excessive tax invoice, the individual added.

Kenny Ng, an analyst at Everbright Solar Hung Kai, stated the choice was “positively unfavorable” for JD.com.

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“Though Tencent’s discount of JD’s holdings could not have a lot influence on JD’s precise enterprise, when the shares are transferred from Tencent to Tencent’s shareholders, the probabilities of Tencent’s shareholders promoting JD’s shares as dividends will improve,” he stated.

South African expertise investor Prosus, Tencent’s largest shareholder with a 29% stake, will obtain the largest portion of JD.com shares.

Funds processor Alipay is a part of Tencent rival Alibaba Group. ($1 = 7.7996 Hong Kong {dollars})

(Reporting by Sophie Yu in Beijing and Scott Murdoch in Hong Kong; Further reporting by Xie Yu, Selena Li, Donny Kwok and Eduardo Baptista in Hong Kong and Nikhil Kurian Nainan in Bengaluru; Writing by Jamie Freed; Modifying by Subhranshu Sahu and Muralikumar Anantharaman)