Tencent Holdings Ltd (騰訊) plans to distribute more than US$16 billion of JD.com Inc (京東) shares as a one-time dividend, representing a near-retreat from the Chinese e-commerce firm that is stoking concerns it is to pull away from other marquee investments.
The surprise move to divest most of its stake in China’s No. 2 online retailer comes as Beijing punishes the country’s tech giants for monopolistic behavior, including maintaining closed ecosystems that favor certain companies at the expense of others.
Tencent’s handout might buy goodwill with the government, which has pushed for the dismantling of barriers and for tech firms to share the wealth.
Yesterday, Tencent president Martin Lau (劉在武) exited JD.com’s board as part of the deal.
“The divestment shouldn’t come as a complete surprise and could be read as a reaction to anti-monopoly investigations — it’s pretty clear that regulators don’t want to see too much ‘faction like’ patterns in big tech,” said Chen Da, executive director at HHSC Assets (HK). “It’s likely that it will be read as the start of breaking up the huddle a bit.”
Tencent plans to give out 457.3 million Class A shares in JD.com, representing about 86.4 percent of its total stake and nearly 15 percent of the online retailer’s total issued shares, a Hong Kong Stock Exchange filing showed.
At Wednesday’s close, the shares in the proposed distribution were worth HK$127.7 billion (US$16.37 billion).
Tencent, which controls about 17 percent of JD.com, would hold about 2.3 percent of the e-commerce firm’s shares after the handout, JD.com said in a separate statement.
The special dividend would be one of the largest shareholder giveaways ever by a Chinese tech company, which have long relied on rapid growth and investment to satisfy investors.
Tencent’s strategy is to invest in companies during their development stage and to exit the investments as they become capable of financing future initiatives on their own, the Internet giant said.
“The board believes that JD.com has now reached such a status, and the board therefore considers that it is an appropriate time to transfer” the majority of the shares to its investors, the company said.
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