Major Tencent Shareholder to Reduce Stakes For Buyback Plan

Tencent released an announcement on Monday at the Hong Kong Stock Exchange, stating that the company’s major shareholder, Prosus, which is mostly owned by Naspers, would sell its shares, and that Naspers expects the number of shares sold each day to be a fraction of the average daily turnover of Tencent‘s shares. After the announcement, the stock price of Tencent Holdings dove during the afternoon.

Prosus is a holding company with the international internet assets of South African investment company Naspers, a multinational listed media group. Prosus was previously spun off from Naspers. The buyback plan is also seen by the market as a way for the two entities to relieve their own pressure.

Naspers, through its holding subsidiary, MIH TC Holdings Limited, is the largest shareholder of Tencent. As early as 2001, during the Internet bubble, NIH in South Africa, a subsidiary of Naspers, bought 46.5% of Tencent at a price of only $32 million. Throughout the past 20 years, Tencent‘s share price has risen from $3.7 apiece when it was listed on the Hong Kong Stock Exchange in 2004 to nearly $400 at present. As of today, Prosus’ shareholding ratio in Tencent is 28.8%, with a direct stake of 2.77 billion shares.

Prosus and Naspers, as major shareholders of Tencent, made two reductions in their holdings in 2018 and 2021, receiving huge returns as a result. According to public information, Prosus and Naspers have experienced challenges in their investments globally due to multiple factors such as the pandemic, and the secondary market value of the two companies has suffered significant shrinkage.

Naspers, which has invested in Tencent for 17 years, first reduced its stake in Tencent back in March 2018, cutting it by 2%, or about 190 million shares. At that time, Naspers promised not to sell further shares for at least the next three years.

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Following the expiration of the three-year commitment, on April 7, 2021, Prosus announced its plan to sell, through its subsidiary MIH TC Holdings Limited, up to 191,890,000 shares of Tencent – equivalent to 2% of Tencent‘s issued share capital. Upon completion of the transaction, Prosus’ shareholding in Tencent is set to drop from 30.9% to 28.82%.

Unlike the previous two reductions, this cut in holdings is to advance from a small ongoing reduction. Some analysts consider this as an attempt by Prosus and Naspers to ease pressure to the fullest extent possible on the basis of minimizing the impact on Tencent. According to the announcement, Naspers expects that the number of Tencent shares sold each day will not exceed 3-5% of Tencent‘s average daily turnover.

In addition to Tencent, Prosus has invested in JD.com, Ctrip, and US delivery giant DeliveryHero. Today, Naspers also announced a sale of its stake in JD.com from Tencent, which was completed on June 24, realizing total proceeds of approximately $3.67 billion, and the sale was not subject to any conditions precedent.