Tencent Slumps Most in Two Months on Prosus Selling Speculation

(Bloomberg) — Tencent Holdings Ltd. tumbled by the most in over two months amid speculation its largest shareholder Prosus NV may speed up the selling of the Chinese tech firm’s stock.

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The internet company’s shares dropped as much as 6% to HK$354.20 in Hong Kong, the most since late January, after news that Prosus planned to deposit an additional 96 million of shares into the city’s stock clearing system. The move, which is typically a precursor to selling stock, raised concerns among traders about the outlook of the company and its ability to extend recent gains.

“It’s likely that Prosus will speed up their selling of Tencent shares when it’s near the level of 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 its Cape Town-based parent Naspers Ltd., first started its campaign to pare back holdings in mid-2022 as a way to fund its own share buyback. The stock sales are an open-ended process and chief executive Bob van Dijk has said that those trades will be executed in small chunks of between 3% to 5% of daily volumes.

As of January this year, Prosus said it sold more than 193 million Tencent shares for a net proceed of $7.2 billion, cutting its position to about 26.9% from 29% in June 2022.

On Wednesday, Prosus shares fell as much as 4.9% in Amsterdam while parent Naspers dropped more than 3% in Johannesburg.

Meanwhile, Tencent has also tried to buy back some of its shares as a way to mitigate the slump. In its current round of buybacks that started on March 27, Tencent has purchased a combined 8.3 million shares. Still, the buybacks have done little to stem further share price declines given broader jitters about a regulatory crackdown and Covid’s impact on the economy.

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 a 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.”

–With assistance from John Cheng, Loni Prinsloo and Kit Rees.

(Updates throughout)