(Bloomberg) — Tencent Holdings Ltd. by the most in more than two months amid speculation that Prosus NV, its largest shareholder, may accelerate the sale of shares of the Chinese technology company.
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Shares of the internet company fell 6% to HK$354.20 in Hong Kong, the most since late January, after news that Prosus plans to deposit an additional 96 million shares in the city’s equity clearing system. This step, which is usually a prelude to selling shares, has raised traders’ concerns about the company’s future and its ability to extend recent gains.
“It is likely that Prosus will accelerate its sale of Tencent shares when it approaches the HK$400 level,” said Stephen Leung, CEO at UOB Kay Hian. “Tencent has repurchased its shares to offset the market impact from the daily sell-off of major owners, but even so, such negative news will always cause some concern.”
Prosus, the lead investor in Tencent through Naspers Ltd. The Cape Town-based subsidiary is launching its first campaign to dilute its holdings in mid-2022 as a way to fund a share buyback. Stock sales are an open-ended operation and CEO Bob Van Dijk has said that these trades will be executed in small portions of 3% to 5% of daily volumes.
As of January this year, Prosus said it had sold more than 193 million shares of Tencent for net proceeds of $7.2 billion, reducing its position to around 26.9% from 29% in June 2022.
On Wednesday, shares of Prosus fell 4.9% in Amsterdam while shares of Naspers fell more than 3% in Johannesburg.
Meanwhile, Tencent also tried to buy back some of its shares as a way to mitigate the recession. In the current round of buybacks that started on March 27, Tencent has purchased a total of 8.3 million shares. However, the buybacks did little to stem further declines in share prices given broader tensions over the regulatory crackdown and the impact of Covid on the economy.
Although stocks are down this week, they are still 87% higher than their October low after China’s reopening measures. Tencent’s plans to develop a ChatGPT-like bot and resume approvals for new games help support some of the gains.
“Tencent’s share price is always affected when there is news of a Prosus sale,” said Vey-Sern Ling, managing director at Union Bancaire Privee. ‘But the sale does not affect Tencent’s fundamentals.’
— with assistance from John Cheng, Loni Prinsloo, and Kit Rees.
(updates throughout)
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