Tencent in China Announces Major Shareholder Stake Sale... Shares Plunge Over 5% Intraday

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Tencent, China's largest information technology (IT) company, saw its shares plunge more than 5% intraday following news of the sale of shares by Prosus, its major shareholder based in the Netherlands.

On the 28th, according to Chinese economic media Caixin, Prosus, the largest shareholder of Tencent, announced a stock price support plan involving selling its holdings, including Tencent shares, to repurchase its own shares. Following this news, Prosus shares surged 15.7% on the Amsterdam Stock Exchange, but Tencent shares immediately declined.

On the Hong Kong stock market that day, Tencent shares fell as much as 5.76% intraday, dropping to 356.40 Hong Kong dollars. This was the largest decline in the past six weeks. Tencent, which had risen about 6% this month amid expectations of the conclusion of Chinese authorities' big tech regulations, gave up most of its gains.

Other big tech stocks such as JD.com, whose shares were also sold by Prosus, fell more than 5% intraday, and the Hang Seng Tech Index in China also dropped 2.9% intraday. This is interpreted as a general weakness in tech stocks due to the combination of profit-taking following the recent bull market and the news of Prosus's share sale.

Prosus holds a 28.9% stake in Tencent and had previously sold about 2% of Tencent shares in April last year. Since Prosus declared at the time of last year's share sale that there would be no additional sales for the next three years, this recent sale decision is being seen as an unexpected move.

Prosus claims it will only sell within 3-5% of Tencent's daily trading volume to avoid shocking the market. The maximum sale size and end date have not yet been disclosed.