Tencent, which invests in Nubank and Omie, intends to make an asset “sale”
After registering its first drop in revenue in history, the Chinese giant Tencent, which owns WeChat, is making a move to divest part of the shares it holds in its investment portfolio.
The expectation is to sell around US$ 14.5 billion in shares of companies that make up the investment portfolio of the Chinese giant estimated at US$ 88 billion and which has more than 800 assets, including Nubank and Omie.
Tencent’s divestment policy, worth $400 billion, will take market conditions into account. Some internal profit targets will also be considered, kept confidential by the company, according to the Financial Times (FT).
Tencent’s divestment is expected to hit delivery service company Meituan, valued at $141 billion. The company would not be a priority for Tencent to leave now given its good performance, but selling a stake could help the Chinese government reduce anti-monopoly pressure on the company, sources told the FT.
Tencent said it has “no target values for divestments” and that it always invests with “the objective of generating solid returns for our company and shareholders, not according to any arbitrary schedule or target”.
With the bad results in the last quarter, the pressure of investors on the company to make divestments also increased. Shareholders want Tencent to primarily trade assets that are underperforming in the market due to China’s government policies to stem a wave of Covid-19 in the country.
Tencent has already invested in some Brazilian startups. In 2018, it invested US$ 200 million in the Nubank operation. At the end of last year, it invested an undisclosed amount in the extension of a Series C round of US$ 580 million in the operation of Omie, a startup that operates with an online management platform.
News of the move comes a few weeks after Tencent released its earnings call for the second quarter of this year. The company’s financial results came with an unprecedented drop in revenue, which stood at US$ 19.8 billion for the period – 3% lower than that recorded in the same quarter last year. The drop in profit was much greater: down 56% to US$ 2.7 billion.
Among the factors that explain the result, the main one is due to the macroeconomic issue. China’s economic growth for the quarter was just 0.4%. The projection of market experts was that the Chinese economy would grow between 0.9% and 1% in the period – a percentage still low for the sweeping numbers that the country came to record years ago.