Tencent Holdings Ltd. TCEHY -4.48% has cut its stake in a highly valued Southeast Asian internet company, shedding an ownership position that was worth about $3 billion.
Tencent, one of the biggest Chinese internet businesses, said it is selling about 14.5 million shares of Sea Ltd. SE -6.63% , a company that runs that runs a popular e-commerce platform called Shopee, makes digital games and offers online financial services. U.S.-traded shares of Sea had closed on Monday at $223.31 apiece.
Following the deal, Tencent will still have a roughly 19% equity stake in Singapore-headquartered Sea, down from 21% previously, and it said it would maintain business relationships with the company. Tencent said it plans to use proceeds from the Sea transaction to fund other investments and social initiatives.
Tencent, which owns the WeChat social-media app, also has videogame studios and has collaborated with Sea on videogame distribution in Southeast Asia for years.
Investors sold off Sea stock on news of Tencent’s divestment, sending its U.S.-traded shares down 11% on Tuesday to close at $197.84. Sea’s valuation has gained significant ground in recent years, with shares trading at nearly five times where they started 2020 even after Tuesday’s decline. Sea’s market capitalization has recently topped $120 billion.
Tencent sold its Sea shares at $208 apiece, at the bottom of an offered range, according to a term sheet seen by The Wall Street Journal. The sale raised a little over $3 billion.
“The share sale unlocks a portion of the value of Tencent’s investment in Sea, which has seen significant growth and expansion in its global business operations,” Tencent said. The company added that the deal’s provisions restrict further sales of Sea stock over the next six months.
Last month, Tencent unwound an even larger corporate investment when it distributed 457 million shares of JD.com Inc. to its own shareholders in the form of a dividend. Those shares in JD.com, an e-commerce company, were worth about $16.4 billion at the time. Analysts said that the move might have been a response to risks posed by an aggressive regulatory stance by China’s government.
Chinese technology companies have been facing government pressure related to anticompetitive behavior and privacy issues, part of a campaign Beijing has said is intended to get the companies to serve public interests better.
Tencent was among the businesses targeted by the government in an effort to rein in their use of big data in providing financial services.
Tencent’s Hong Kong-listed shares fell 3% in Wednesday morning trading. They have declined about 25% over the past 12 months.
Write to Matt Grossman at matt.grossman@wsj.com
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Appeared in the January 5, 2022, print edition as ‘Tencent Unloads $3 Billion Stake in Internet Company.’
