JD.com Stocks Plunge as Tencent Dilutes its $16.37B Stake

On Thursday, JD.com stocks plunged after Tencent announced to dilute its $16.00 billion stake in the company.

Accordingly, the e-commerce firm slashed 7.38% or 2.64 points to $33.16 per share. 

In the early trade, it slumped 11.20%, its most extensive daily percentage drop since its debut in June 2020.

Inversely, the gaming giant, Asia’s most valuable listed company, gained 4.20% or 2.26 points to $59.06 per share.

Tencent’s surprise divestment move in China’s second-largest online retailer came amid the persisting tech regulatory crackdown. 

Beijing’s scrutiny weighed down the technology firms as it mainly aimed for a domestic concentration of market power.

Eventually, the owner of WeChat slashed 2.30% from around 17.00%, weakening its ties to JD.com.

In line with this, Tencent’s largest shareholder, South African investor Prosus will receive 29.00% of the divested stake.

At the same time, this announcement also fueled questions about its plans for other holdings.

Nevertheless, Tencent explained that it is already the right time to transfer its stake as the e-commerce business can now self-finance its growth.

Correspondingly, it chose to distribute its shares as a dividend to avoid a steeper fall in JD.com’s share price.

Moreover, the two companies noted that they would continue their business relationship. They ensured that they would pursue their ongoing strategic partnership agreement.

Tencent’s Move on JD.com as Portfolio Divestment?

Meanwhile, traders infer that there could be other divestments on the way as Tencent heed the antitrust call.

JD.com’s stake belongs to the gaming giant’s portfolio of listed investments valued at $185.00 billion as of September 30. 

This covers stakes in e-commerce business Pinduoduo, food delivery company Meituan and video platform Kuaishou. 

In addition, it includes electric vehicle maker Tesla and music streaming service Spotify.

However, experts explained that Tencent has no plans to leave its other investments.

Subsequently, they cited that Pinduoduo and Meituan are not as well-developed as JD.com.