Tencent Suffers Heavy Losses On News Of Largest Shareholder's Stock Sale

  • Tencent Holdings Ltd TCEHY shares saw the most significant declines over two months amid speculation that its largest shareholder Prosus NV PROSY PROSF speeding up the selling of the Chinese gaming company's stock.
  • Tencent's shares lost 5.2% to HK$357.2 in Hong Kong, the most since late January, after news that Prosus planned to deposit an additional 96 million shares into the city's stock clearing system, Bloomberg reports.
  • Prosus' move, typically a precursor to selling stock, raised concerns among traders about the company's outlook and ability to extend recent gains.
  • Prosus will likely speed up their selling of Tencent shares when it's near HK$400, said Steven Leung, an executive director at UOB Kay Hian. "Tencent has been buying back their shares to offset the market impact of big holders selling every day, but still, such negative news would always cause some concern." 
  • Prosus, an early investor in Tencent through parent Naspers Ltd NAPRF NPSNY, first started its campaign to pare back holdings in mid-2022 to fund its share buyback.
  • As of January this year, Prosus said it cut its position in Tencent to about 26.9% from 29% in June 2022.
  • Still, the buybacks have done little to prop up its share price, given broader concerns about a regulatory crackdown and Covid's economic impact. 
  • Though shares have slipped this week, they are still some 87% higher from an October low following China's reopening measures. 
  • Tencent's plans to develop a ChatGPT-like bot and China's resumption of new game approvals are helping support some gains.
  • "Tencent's share price always takes a hit when there's news of Prosus selling," said Vey-Sern Ling, managing director at Union Bancaire Privee. "But the sale doesn't affect the fundamentals of Tencent." 
  • In the U.S. bourse, Tencent shares have gained 6.4% YTD and 47.4% in the last six months.
  • Price Action: TCEHY shares traded lower by 3.92% at $45.55 premarket on the last check Tuesday.
  • Photo by Chris Yunker via Flickr
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