Tencent hands out US$16b of JD stock in crackdown-led shift

[HONG KONG] Tencent Holdings plans to distribute more than US$16 billion of JD.com shares as a one-time dividend, a surprise retreat from the Chinese e-commerce firm after Beijing moved to curtail the power of tech monopolies.

The unexpected move to divest most of its stake in China's No 2 online retailer comes as Beijing punishes the country's tech giants for anti-competitive behaviour, including maintaining closed ecosystems that favour certain companies at the expense of others. Tencent's handout may buy goodwill with the government, which has pushed for the dismantling of barriers and for tech firms to share the wealth. As part of the deal, Tencent President Martin Lau will exit JD's board effective Thursday (DEC 23).

The payout stirred speculation that Tencent may be preparing to pare its holdings in a plethora of companies, including some of China's biggest tech names, as it pivots to focus on overseas growth and new arenas such as the metaverse.

JD is just one of several Tencent-backed firms - including Pinduoduo, ride-sharing giant Didi Global and food delivery giant Meituan - that have come to dominate their respective spheres, thanks in part to the enormous traffic generated by WeChat's billion-plus users.

Tencent surged 4.2 per cent, while shares of JD dropped 7 per cent as at the Thursday close in Hong Kong.

Still, the sizable JD stock sale may prove to be a one-off move for Tencent, which has been struggling to reassure its shareholders after a turbulent year. A person familiar with Tencent's management said they have evaluated its portfolio and have no intention of paring down or exiting other investments - such as Meituan and Kuaishou Technology - in the coming months.

Meituan closed 1.7 per cent lower, paring early losses, while those of Kuaishou and fellow Tencent investee Bilibili ended near their lows for the day.

"The divestment shouldn't come as a complete surprise and could be read as a reaction to anti-monopoly investigations - it's pretty clear that regulators don't want to see too much 'faction-like' patterns in big tech," said Chen Da, executive director at HHSC Assets (HK). "It's likely that it will be read as the start of breaking up the huddle a bit."

The special dividend would rank among the largest shareholder giveaways ever by a Chinese tech company, which have long relied on rapid growth and investment to satisfy investors.

BLOOMBERG