Tencent is first Asian company to top US$500 billion in value, joining Apple and Facebook

A US$1,764 investment in Tencent’s 2004 initial public offering is now worth US$1 million.

PUBLISHED : Monday, 20 November, 2017, 4:21pm
UPDATED : Tuesday, 21 November, 2017, 11:37am

The meteoric rise of Tencent Holdings can be illustrated in the outsize gains of its Hong Kong-listed shares, which have become a wealth generator of spectacular proportions for those fortunate enough to have bought in early.

In fact, US$1,764 invested in the company’s 2004 public offering would now be worth US$1 million, after taking a 2014 stock split into consideration, a 500-fold rise in the stock value of China’s largest game producer and social network operator.

Shares of the Chinese internet giant rose 4.12 per cent to close at HK$420 on Monday, lifting its market value to HK$3.99 trillion (US$511 billion), becoming the first Chinese tech firm to crack the US$500-billion threshold, a club that includes US tech giants such as Apple, Alphabet, Facebook and Microsoft.

In June 2004, when Tencent debuted on the Hong Kong stock market, it priced its share at HK$3.7 apiece, or HK$3,700 for a single board lot of 1,000 shares. Today, that 1,000 shares would be worth HK$2.1 million.

Tencent has gone so well that four of its executives are paid more than HK$300 million each, making them the highest paid executives in the city.

Tencent’s rise underscores the transformation among the world’s largest companies over the past decade.

In 2007, none of the world’s 20 largest companies were technology, compared with three this year – Apple, Samsung Electronics, and AT&T, according to Fortune, measuring these companies by total revenue.

Alibaba ranks as the next biggest among mainland Chinese technology companies, with a market valuation of US$474 billion, based on the closing price of its New York-listed shares on Friday.

Tencent, headed by Pony Ma Huateng, has seen its stock price soar nearly 120 per cent so far this year.

The Shenzhen-based company reported third quarter net income rose 69 per cent on year, beating market estimates.

Earnings were boosted by its smartphone games unit, including Honour of Kings, the fantasy role-playing “multiplayer online battle arena” game, and its efforts to derive more advertising revenue from its video streaming platform and WeChat messaging app.

Wechat’s user base reached 980 million at the end of September, helping drive the company’s digital content business, Tencent said.

The company has also benefited from the initial public offering of its online publishing and e-book unit China Literature, which skyrocketed nearly 90 per cent in debut trade earlier this month.

Tencent’s China Literature most-profitable IPO debut in a decade after value soars as much as 100pc

China Literature was quoted at HK$95.35 in afternoon trade on Monday, 73 per cent above its offer price of HK$55.

Tencent did not immediately respond to an email request from the Post for comment on the share move.

South African media company Naspers holds a more than 33 per cent stake in Tencent, worth nearly US$170 billion.

Tencent’s 2016 tech executive pay surpasses Apple, IBM

China’s technology companies have attracted a surge in investor interest as companies like Tencent break new ground in the real-world application of facial recognition, mobile payments, electronic commerce and artificial intelligence. The Chinese government has also made clear its ambition for the mainland to become a leader in advanced technologies by including AI into its key industry plans, a recognition of technology’s role in helping to transform the world’s second-largest economy.

Alibaba is the owner of the The South China Morning Post.

(Corrects the second paragraph to fix the initial investment needed to reach US$1 million)

With additional reporting by Li Tao and Bien Perez