Tencent Holdings Loses $62 Billion in Two-Day Rout
Tencent’s most notable product is the omnipresent WeChat Pay, the internet payment system integrated into China’s primary social media app, WeChat. The app also possesses a number of other capabilities, including instant messaging and numerous third-party integrations.
The meteoric sell-off of Tencent shares stems from investor concerns that the company could be next in line for Chinese regulators clamping down on domestic Big Tech companies. Increased supervision of Tencent would be in line with China’s campaign to extend further control over homegrown technology giants. Unfortunately, this would also raise plenty of issues for investors, including loan-operation and antitrust concerns.
“All else equal, we think it could be argued that Tencent’s FinTech business is now valued at almost zero,” Bernstein analysts stated in a research report. On Monday, Tencent’s stock devalued more than 4% in Hong Kong, following a 4.4% drop on Friday, Bloomberg reported.
Tencent is not alone in this: Baidu, another Chinese tech company, also faced 500,000-yuan fines for investments and acquisitions made in the past. What’s more, Jack Ma’s Ant Group, the company that owns and operates Alipay (another widespread online payment app), was the first on the list for these crackdowns.
According to a last year’s report, Ant Group had been preparing for a colossal initial public offering (IPO), estimated to be worth almost $35 billion. The listing drew a lot of attention and attracted $3 trillion in bids. It was supposed to be the largest IPO in history and was planned for both the Hong Kong and Shanghai exchanges.
Unfortunately for these companies, Chinese regulators view internet payment services as closer to bank operations than they are in practice. As a result, Tencent will probably be forced to establish a financial holding company to include its payments, banking, and insurance services, like Ant Group was.
Image credit:Wikimedia Commons, under Attribution-ShareAlike 4.0 International (CC BY-SA 4.0) license.
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