Shares of the Chinese food delivery company Meituan (HKG:3690) (OTCMKTS:MPNGY) plummeted in Hong Kong on Tuesday after a report that Tencent Holdings Ltd (HKG:0700) (OTCMKTS:TCEHY) was planning to unload most or all of its $24 billion stake. However, another news outlet countered the first report, saying its sources claim Tencent has no plans to sell its stake in Meituan.
Q2 2022 hedge fund letters, conferences and more
Report That Tencent Plans To Sell Its Meituan Stake
Citing four sources aware of the matter, Reuters reported that Tencent, which owns WeChat, China's most popular messaging app, plans to start unloading its stake in Meituan this year. They claimed Tencent plans to sell those shares to placate Chinese regulators and monetize an investment it has held for eight years.
The Chinese conglomerate owns 17% of Meituan, and three of Reuters' sources claim it has been discussing a divestiture of its stake with financial advisors over the past few months. Those discussions reportedly covered strategies for executing what could be a sizable sale of Meituan shares.
Countering The First Report Of Tencent Selling Meituan Stake
Although its Hong Kong-listed shares remained down, shares of Meituan traded over the counter in the U.S. recovered quickly after the second report, which came from CNBC. The stock jumped more than 1% in premarket trading on Tuesday.
Citing one source familiar with the matter, CNBC reported that Tencent has no plans to unload its stake in the food delivery giant. The news outlet pointed out that Tencent is already taking action to calm Chinese regulators by divesting stakes in some of its largest investments.
In December, the conglomerate announced plans to sell most of its stake in JD.com, the second-biggest e-commerce company in China. Tencent also raised $3 billion by unloading some of its shares in Sea, an e-commerce and gaming company based in Singapore.
Chinese Crackdown
The contradicting news about the sale come as Chinese regulators continue the crackdown on tech giants that they began in late 2020. Many Chinese tech firms, including Tencent and Alibaba, have built their empires by acquiring significantly sized stakes in other tech companies, concentrating their power in the Chinese tech market.
In many cases, Chinese regulators are forcing these companies to divest some or all of their multi-billion-dollar stakes. Tencent is also reportedly exiting a number of other companies as it pivots toward the global gaming market.
The company formed the current entity by investing in another company called Dianping in 2014 and merging it with Meituan the following year.
