Tencent-backed giants dive on $24b Meituan sale talk

Bloomberg

Tencent Holdings Ltd’s biggest investees plummeted after Reuters reported the social media giant intends to sell all or much of its $24 billion stake in food delivery giant Meituan to appease Beijing.
The social media giant has engaged financial advisors in recent months on ways to execute the sale of a roughly 17% stake, Reuters reported, citing sources with knowledge of the matter. Meituan slid more than 9% in Hong Kong, while video service Kuaishou Technology fell more than 4% and Bilibili Inc dipped 2.5%. In New York, e-commerce player Pinduoduo Inc slipped about 3%.
Beijing since late 2020 has worked to curb the influence of tech industry leaders from Tencent to Alibaba Group Holding Ltd. The two companies exert enormous sway over the Chinese internet economy through part-ownership of hundreds of startups and publicly traded firms. Tencent controlled 606 billion yuan ($89.2 billion) of listed company investments as of March.
The WeChat operator last year began disclosing plans to sell shares in investees such as e-commerce giant JD.com Inc and Southeast Asia’s Sea Ltd. That in turn spurred speculation it would soon consider paring stakes in other firms such as Meituan and PDD.
“The real fundamental impact of such divestments are usually minimal because business relationships are retained, but there may be short-term pressure not just on Meituan’s share price but also on Tencent’s other investees across the tech industry in China and globally,” said Vey-Sern Ling, a managing director at Union Bancaire Privee.
Tencent was expected to report its first-ever quarterly revenue decline when it reports earnings. China’s social media and gaming behemoth is grappling with a deepening downturn in the world’s No. 2 economy, the product of a worsening property slump and arbitrary coronavirus lockdowns from Shanghai to Shenzhen.
The country’s giant internet industry has made peace with a new era of sedate growth, shifting its focus to profitability over a market-grab after Beijing’s sweeping crackdown wiped more than $1 trillion off their combined market value
in 2021.
Beijing remains a headache for Tencent. Although regulators resumed approving new games in April after a months-long hiatus intended to curb
addiction, China’s premier developer has yet to win a nod for a single title this year. For now, Tencent is still counting on aging cash cows like Honor of Kings to spur growth for its most lucrative business, while it fights newer mobile hits like Genshin Impact and Diablo Immortal.
It’s unclear from the Reuters report when Tencent might begin to actually unload stock in its investees.