On Thursday, Tencent made an interesting announcement. The tech giant will distribute HK$127.69 billion ($16.37 billion) worth of its JD.com stake to shareholders. As a result, Walmart will become JD.com’s biggest shareholder. Currently, Tencent owns 17% of JD.com. However, after distributing HK$127.69 billion worth of its JD.com stake to shareholders its stake will decline to 2.3%. Tencent’s decision comes as China leads a broad regulatory crackdown on technology companies.
It first invested in JD.com several years ago in 2014. According to Tencent, it was the right time to transfer its stake given JD.com reached a stage where it can self-finance its growth. JD.com’s shares dropped 11.2% in early trade in Hong Kong on Thursday. Meanwhile, shares of Tencent jumped 5.7%.
Tencent and its plans
Tencent and JD.com said they would continue to have a business relationship, including an ongoing strategic partnership agreement. But Tencent’s Executive Director and President Martin Lau will leave JD.com’s board.
Interestingly, Tencent decided to distribute the shares as a dividend rather than sell on the market in an attempt to avoid a steep decline in JD.com’s share price and a high tax bill.
Analysts, as well as Investors, are trying to learn more about Tencent’s plans. They said the distribution of JD.com’s stake raised questions about the future of other companies. For example, Tencent’s investments in Pinduoduo and Meituan could also be divested amid regulatory pressure to scale down. The person who is familiar with the matter made a comment regarding Tencent’s plans. The tech giant has no plans to exit the investments mentioned above because they aren’t as well-developed.
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