A Record Stock Sale Generates $15 Billion For Tencent’s Main Shareholder Prosus

Share worth $14.7 billion in the Chinese social media and gaming giant Tencent’s has been sold by the firm’s biggest shareholder. The seller plans to use the money generated from the sale for investing in other growth oriented ventures.

The Chinese tech giant Tencent said in a Hong Kong Stock Exchange filing on Thursday that a 2 per cent stake in the company was sold for 114.2 billion Hong Kong dollars ($14.7 billion) by Prosus, a spin-off by South African media and internet investment firm Naspers.

For Nasper Tesncent is by far its most successful investment. A strong financial performance was reported by Tencent during the pandemic.

According to data provider Refinitiv, this deal is the biggest block trade ever. Block trades are typically arrangements for sale and purchase of shares directly between big institutional investors bypassing trading of the same on the public stock exchanges.

Despite the completion of the deal, Porsus will continue to remain the single largest shareholder in Tencent with a stake of 28.9 per cent. However the South African investor will no longer have the controlling shareholder status which, according to the rules applicable on companies listed in Hong Kong, is given to shareholders who has at least 30 per cent voting rights.

Back in 2001 when Prosus parent Naspers made the investment in Tencent, it had paid $32 million and had taken up a stake of 46.5 per cent in the Chinese company. Its remaining stake is now worth $221 billion. That rate of treun on its investment can only be compared with the return on the $20 million investment that was made in Alibaba in 2000 by Japan’s investment firm SoftBank.

The cash reserves of Prosus were significantly boosted by the deal.  Late last year, a net cash position of $4.3 billion was reported by the Amsterdam-based investment firm.

“Prosus intends to use the proceeds of the sale to increase its financial flexibility to invest in growth, plus for general corporate purposes,” Prosus said in a statement.

The company laso pledged not to sell any more shares that it holds in Tencent for at least the next three years.

A large rise in profit for the fourth quarter of 2020, beating estimates, was reported by Tencent last month. But concerns of a growing government crackdown on Chinese tech companies essentially overshadowed the performance of the company.

Growth trends in the consumer internet space with growing digital transformation during the pandemic have benefitted its businesses in which it is invested, Prosus, which primarily invests in that space, had said last November.

“The focus now is on growing the business and improving financial flexibility and giving ourselves the room to be able to deploy across multiple capital allocation opportunities,” Basil Sgourdos, financial director and executive director of Naspers, said in an earnings call in November.

(Adapted from CNN.com)

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