(Bloomberg Opinion) — Tencent Holdings Ltd. fell the most in more than two months amid speculation that its largest shareholder, Prosus NV, could speed up the sale of shares in the Chinese tech company.
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Shares of the internet company fell 5.2% to HK$357.2 in Hong Kong, the biggest drop since late January, after news that Prosus planned to deposit an additional 96 million shares in the system. of compensation of actions of the city. The move, which is typically a precursor to a stock sale, raised concerns among traders about the company’s prospects and its ability to extend recent gains.
“Prosus is likely to accelerate the sale of Tencent shares when it is close to the HK$400 level,” said Steven Leung, chief executive of UOB Kay Hian. “Tencent has been buying back its shares to offset the market impact of the daily sell-offs from big holders, but even so, such negative news always causes some concern.”
Prosus, an early investor in Tencent through its Cape Town-based parent Naspers Ltd., began its campaign to reduce stakes in mid-2022 as a way to finance its own share buyback. Share sales are an open process and chief executive Bob van Dijk has said those transactions will be executed in small chunks of 3-5% of daily volumes.
As of January this year, Prosus said it sold more than 193 million Tencent shares for a net income of $7.2 billion, reducing its position to around 26.9% from 29% in June 2022.
On Wednesday, shares of Prosus fell as much as 5.5% in Amsterdam, while parent Naspers fell more than 3% in Johannesburg.
Meanwhile, Tencent has also tried to buy back some of its shares as a way to mitigate the downturn. In its current round of buybacks that began on March 27, Tencent bought a combined 8.3 million shares. Still, the buybacks have done little to stop further declines in the share price given broader jitters over a regulatory crackdown and the impact of Covid on the economy.
Although shares have fallen this week, they are still 87% above the October low following China’s reopening measures. Tencent’s plans to develop a bot similar to ChatGPT and the resumption of approvals for new games are helping to support some gains.
“Tencent’s share price is always affected when there is news of the Prosus sale,” said Vey-Sern Ling, managing director of Union Bancaire Privee. “But the sale does not affect Tencent’s fundamentals.”
–With assistance from John Cheng, Loni Prinsloo, and Kit Rees.
(Updates with closing price in the second paragraph)
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