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Tencent Keeps Selling Parts of its Portfolio

Moves come as pressure from Chinese regulators on big tech names continues, Real Money's Alex Frew McMillan says.

Tencent Holdings  (TCTZF) , the video game maker and operator of Chinese mega-app WeChat, continues to rationalize its investment portfolio, with the sale of a portion stake in Singapore-based game maker and e-commerce operator Sea Ltd.  (SE) - Get Sea Ltd. (Singapore) Report.

The move comes at a time when Tencent is curbing its positions in numerous portfolio companies and as the Chinese government continues to pressure larger technology companies to toe the leadership line.

“One of the Chinese Communist Party's main concerns is anticompetitive behavior by Chinese Internet and technology operators,” Alex Frew McMillan wrote recently on Real Money. “The walled-off Chinese Internet space has split into investment camps, where Tencent has a stable of companies that are its investment universe.”

He added that “It's not uncommon for such companies to require investors to concentrate share ownership only in their stable of companies if they want access to future hot stock offerings in that stable.” 

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Officially, Tencent (HK0700) is raising US$3.0 billion by reducing its holding in Sea from 21.3% to 18.7% with the sale of 14.5 million Class A shares. Tencent sold the shares at US$208, according to a term sheet seen by Reuters. “That means Tencent sold the shares at the lower end of the US$208 to US$212 indicative range,” said TheStreet’s Alex Frew McMillan in Real Money recently.

Last month, Tencent said it would sell 86.4% of its holding in the Chinese e-commerce site operator JD.com  (JD) - Get JD.com Inc. Report.

“Tencent opted to return the cash from the sale of 457.3 million shares in JD (HK:9618) to shareholders in the form of a special dividend,” McMillan said. “At the Hong Kong share price of HK$279.20 at the time of the sale announcement, the sale would be valued at HK$127.7 billion (US$16.4 billion).”

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