Tencent Holdings, the Chinese internet giant, experienced a significant drop in its stock price as its largest shareholder, Prosus, plans to deposit an additional 96 million shares into the Hong Kong stock clearing system, raising speculation that Prosus may accelerate its selling pace. Although Tencent has been repurchasing its shares, this move by Prosus may put pressure on the stock. Traders predict that Prosus is likely to speed up selling of Tencent shares when they reach HK$400, a price point that is not far off. The news caused some concern, and Tencent’s stock fell as much as 4.9% to HK$358 on Wednesday, its biggest decline since February 21.
According to Steven Leung, UOB Kay Hian’s executive director, Tencent has been buying back its shares to offset the market impact of big holders selling every day, but negative news like this always causes concern. As of January 2023, Prosus had sold over 193 million Tencent shares, with a net proceed of $7.2 billion, reducing its stake to about 26.9% from 29% in June 2022 when it first announced the selloff plan. Tencent has been buying back a combined 8.3 million shares, almost every trading day since March 27, after suspending the operation for more than two months. However, its previous buybacks did not manage to stem the stock declines when the market was concerned about a regulatory crackdown and Covid’s impact on the economy.
Despite the negative news, Tencent’s shares have rebounded by 90% from their October low, thanks to the company’s plan to develop a ChatGPT-like bot and Beijing’s resumption of game approvals, which have boosted its fortunes. Prosus’s selling of Tencent shares does not affect the fundamentals of Tencent, according to Vey-Sern Ling, managing director at Union Bancaire Privee.
In conclusion, Tencent’s stock price has taken a hit due to the news of Prosus’s share selling, leading to speculation that the pace of selling may accelerate. While Tencent has been buying back its shares, this negative news always causes concern. However, Tencent’s shares have rebounded by 90% from their October low, and the selling of Tencent shares by Prosus does not affect the company’s fundamentals.
