JD.com dives as Tencent gives away $127b stake

Chinese gaming and social media giant Tencent (0700) will pay out a HK$127.69 billion dividend by distributing most of its JD.com (9618) stake to its shareholders for the first time, weakening its ties to the e-commerce firm and raising questions about its plans for other holdings.

The move comes as Beijing leads a broad regulatory crackdown on technology firms, taking aim at their overseas growth ambitions and domestic concentration of market power.

Tencent rose 4 percent on the news and became the best performer in the Hang Seng Tech index but JD.com's shares plunged 11.2 percent at one point in trading hours yesterday, the biggest daily percentage decline since it was listed in June 2020, before closing 7 percent lower as the biggest loser in the Tech index.

While Tencent's stake in JD.com fell to 2.3 percent from 17 percent, JD.com said its business partnership with Tencent remains intact. Tencent, who first invested in JD.com in 2014, said it was the right time for the divestment, given the e-commerce firm had reached a stage where it can self-finance its growth.

Eligible Tencent shareholders will be entitled to one share of JD.com for every 21 shares they hold. Tencent will offer trading services for odd-lot holders by commissioning an equity broker from March 25 to April 25, 2022.

Kenny Ng Lai-yin, a strategist at Everbright Sun Hung Kai Securities, said the decision was "definitely negative" for JD.com. He reckoned that it is possible for Tencent to reduce more investments that have already gone public, or those who have similar businesses with itself gradually.

The regulatory overhauls sweeping in the technology industry may be a factor for Tencent to offload some stakes, Ng added.

Tencent is one of a handful of technology giants that dominate China's internet space and which have historically prevented rivals' links and services from being shared on their platforms.

Shares of other Tencent-invested companies fell between 1 to 6.5 percent, including Meituan (3690), Weibo (9898), China Literature (0772) and Bilibili (9626). Meituan recouped some losses later on news that global coffee chain Starbucks is seeking partnerships with firms in China, including Meituan.

Shares of artificial intelligence firm Baidu (9888) were little changed yesterday, despite reports that it would cut 300 staff in its game division.

In other news, TikTok has topped the world's most popular website by traffic in 2021, outpacing Google.com, according to cloud-services company Cloudflare.