China’s social media and gaming company Tencent has announced to pay out a $16.4 billion dividend by distributing most of its JD.com stake.
The latest move by Tencent comes as the country is conducting a broad regulatory crackdown on technology firms. These firms in particular have been aimed due to their overseas growth ambitions and domestic concentration of market power.
According to Tencent, it plans to transfer JD.com stake worth HK$127.69 billion ($16.37 billion) worth to its shareholders. This would cut down its holding to 2.3% from around 17% now, while also losing its spot as JD.com’s biggest shareholder to Walmart. JD.com is China’s second-biggest e-commerce company.
According to the owner of WeChat, Tencent’s move came at the right time for divestment, given the e-commerce firm had reached a stage where it can self-finance its growth.
Earlier this year, the country’s regulators blocked Tencent’s most anticipated merger of the country’s top two videogame streaming sites worth $5.3 billion. It had ordered it to end its exclusive music copyright agreements with WeChat and found the latter to illegally transfer users data.
According to an analyst from LightStream Research, Mio Kato on the latest JD.com stake transfer, the move seems to be a continuation of the concept of bringing down the closed ecosystem and increasing competition among the tech giants by weakening partnerships, exclusivity and other arrangements which in turn weaken competitive pressures.
He further mentioned that it could have implications on Tencent’s payments market where its relationship with Pinduoduo and JD have helped it maintain some competitiveness with rival Alipay.
In Hong Kong trade, JD.com shares downgraded 11.2% at one point on Thursday. The amount so far is the biggest daily percentage decline before closing with a 7.0.% decline since its debut in June 2020 in Hong Kong market. While Asia’s most valuable listed company, shares of Tencent rose 4.2%.
According to the companies, even though Tencent Executive Director and President Martin Lau will step down from JD.com’s board immediately they mentioned to continue having a business relationship, including an ongoing strategic partnership agreement.