JD.com plummeted on Thursday after Tencent announced it will hand over its majority stake in the Chinese e-commerce giant to its shareholders.
Tencent said it will declare a one-time dividend, in which it will distribute more than 457 million JD.com Class A common shares to shareholders, totaling approximately HK$127.7 billion (HK$127.7 billion). about $16.37 billion).
Tencent has investments in several companies, including other major Chinese internet companies such as Meituan and Pinduoduo. While those investments have helped fuel growth, Shawn Yang of Blue Lotus Capital Advisors said they could also raise concerns about Tencent’s size and influence.
“I think it’s basically Tencent’s choice, to gradually reduce those shares and try to show the public that… ‘we’re not as big as you think’,” Yang said. ‘ “That could perhaps alleviate some of the concerns about its size and influence.”
Beijing has been cracking down on China’s domestic tech sector for months, citing concerns about monopolies and data security, massive fines against companies like Alibaba and Meituan.
Yang said Tencent’s move may have stemmed from a desire to deflect attention away from itself rather than JD’s fundamentals. He explained JD’s e-commerce business has been “very resilient” this year compared to its competitors. Pinduoduo and Alibaba.
In a filing Thursday, Tencent said part of its strategy includes investing in companies early to support growth and exiting as they “always have the ability to self-finance initiatives.” in your future.” Tencent said JD.com has reached that stage and now is the “right time” to distribute its shares to shareholders.
JD.com said in a separate statement that Tencent’s stake will drop from about 17% currently to about 2.3% following the move. It also said the two companies will continue to maintain their strategic partnership agreement.
Shares of JD.com in Hong Kong closed 7.02% lower. On the other hand, Tencent shares rose 4.24%, going against the general trend of Chinese technology stocks listed in this city. The Hang Seng Tech Index fell 0.83% to 5,638.31.
