Tencent snaps 4-day winning streak as US$20.3 billion dividend bonanza fails to mask WeChat operator’s struggling business
- Tencent to hand out 958.1 million shares in Meituan as interim dividend-in-specie on a 1-for-10 basis, a block worth HK$159.4 billion
- Move follows an earlier decision to also farm out its stake in JD.com as dividend as the WeChat operator’s results failed to sparkle amid clampdown
Tencent Holdings snapped a four-day winning streak in Hong Kong trading as investors worried about its struggling business, overriding a US$20.3 billion bonanza for shareholders in the form of a special dividend payout.
The WeChat operator slid 3.5 per cent to HK$284.40 at the close, halting a 27 per cent winning streak since Friday. The stock had rebounded 43 per cent from an October low going into its earnings report on Wednesday. Meituan tumbled 5.9 per cent to HK$152.80, taking a respite from a 35 per cent advance from a nadir last month.
“The [Meituan] divestment is a signal that Tencent is downsizing its business, either because of the antitrust law or the weakness in the internet sector,” said Wang Chen, a partner at Xufunds Investment Management in Shanghai. “Tencent will focus on the fintech and online game operations and that will cut off some revenue sources.”
The WeChat operator reported an unexpected increase in profit for the third quarter thanks to cost-cutting measures, while revenue dropped for a second straight time for the three-month period.
The Meituan block represents 90.9 per cent of shares held by Tencent in its investment portfolio, or 15.5 per cent of the capital in the food-delivery platform operator.
Shares of some other Chinese tech companies held by Tencent also fell. Video-platform operator Bilibili shed 2.2 per cent to HK$121.60 and e-book operator China Literature lost 2.8 per cent to HK$27.70.
Some investment banks predicted that a turnaround in Tencent’s business and the stock price was just around the corner.
Goldman Sachs said in an October report that the company would return to growth this quarter due to its efforts to monetise the vide accounts, while Blue Lotus Capital Group upgraded the recommendation to buy in August, citing attractive valuation.