Reports have emerged recently claiming that Tencent Holdings is considering a reduction of its shares in Meituan, Beike, Didi and other companies, in order to provide funds for its stock repurchase and new business ventures. On September 20, a spokesperson for Tencent responded that it did not have any such plan, timetable or target amount for reducing its holdings, adding that the firm does not need to sell any of its shares in order to carry out the repurchase, for which current cash flows can provide sufficient funds. Moreover, the spokesperson assured, the firm has not contacted any investment banks about reducing its holdings.
On September 1, The Financial Times reported that Tencent management has put forward a soft internal target to divest about 100 billion yuan ($14.2 billion) from its listed stock assets this year, which will depend on market conditions and internal profit targets. On the same day, Tencent denied the report, saying that its investment has always aimed at creating rich returns for the company and shareholders, rather than reaching a certain amount within any given time. It claimed it has not been subjected to external pressure on its portfolios.
In a previous conference call for Tencent‘s second-quarter financial report held on August 17, a company executive said that the reports claiming that it will sell Meituan shares were “not accurate.” In the call, the executive said that Tencent has been optimizing its investment portfolios, that it had paid shareholders around $17 billion or $18 billion, and that it was hoping to provide sufficient returns for shareholders.
It is worth noting that, perhaps due to the selling pressure of South African internet group Naspers, a major shareholder of Tencent, it has been increasing repurchase efforts in recent days, which has also cost huge amounts of money, causing speculation that it will reduce its shares in its invested companies to obtain funds.
On September 20, Tencent announced the repurchase of 1.2 million shares at a price of HK$292.4 to HK$296.4, with a total cost of about HK$353 million ($45 million). Since August 19, it has repurchased 24.86 million shares for 22 consecutive trading days, costing HK$7.74 billion. Wind’s data show that Tencent has spent HK$17.7 billion on repurchases this year.
Tencent currently has a huge investment portfolio, including Meituan, Pinduoduo, Kuaishou, NIO and other leading companies. However, since the end of last year, it has continuously reduced its holdings of shares in listed companies, including JD.com, Sea Limited and New Oriental Education.
According to its financial report, as of June 30, the fair value of Tencent equity in listed investment companies (excluding subsidiaries) was 601.9 billion yuan ($85.4 billion). At the end of last year, the figure was 982.835 billion yuan. This also means that the fair value of Tencent investment has decreased by about 380 billion yuan within six months.
On September 21, Tencent Holdings’ share price fell below HK$290 again, falling 1.43% to HK$289.20 in intraday trading, continuing to hit a new low since December 2018. It now has a market value of HK$2.78 trillion.