HONG KONG—Chinese social-media giant Tencent Holdings Ltd. TCEHY 5.79% is shedding most of its stake in JD.com Inc., JD -6.92% saying that the e-commerce company has grown to the point where it no longer requires Tencent’s financial backing.
Tencent on Thursday said it would distribute about 457 million shares of JD.com, worth roughly $16.4 billion, in the form of a special dividend to Tencent shareholders. The distribution leaves Tencent with a 2.3% stake in JD.com from 17% before, when it was JD’s largest shareholder.
Tencent’s shedding of its stake in JD effectively closes a chapter in which the social-media giant built up a stake in the rival of Alibaba Group Holding Ltd. to challenge it in China’s huge e-commerce market. It still retains significant stakes in other major e-commerce players such as food-delivery company Meituan and shopping giant Pinduoduo Inc.
The Chinese government has intensified a regulatory crackdown on some of the country’s largest companies this year, with a view to ensuring big firms do more to serve the Chinese Communist Party. The campaign has led to antitrust actions against some of the country’s technology titans, with Tencent among those in its sights.
Against the backdrop of growing government scrutiny, analysts at Bernstein said it was reasonable to assume that risk mitigation was a factor in Tencent’s move. A Tencent spokeswoman declined to comment.
As part of the new arrangement, Tencent said its president, Martin Lau, resigned from the board of JD.com. Tencent said both companies would continue to maintain a business relationship despite the disposal of its stake.
Shares of JD.com fell 7.6% in morning trading in Hong Kong following the announcement of the distribution. Shares of Tencent rose 4.5%.
Tencent, best known for its ubiquitous social-media app WeChat and for its dominant presence in China’s online gaming market, has invested widely in tech companies domestically and overseas, becoming a significant backer of up-and-coming companies in social media, entertainment and electric vehicles.
In November, Tencent disclosed an investment portfolio worth the equivalent of about $188 billion as of the end of September, up by more than one-third from a year ago.
More recently, Tencent has been in the crosshairs of China’s regulatory crackdown on internet and other big tech companies, helping to send shares down about 20% this year.
In a research note, Thomas Chong, an analyst at investment bank Jefferies, said JD.com has seen healthy growth in its financials, including margins, revenue, profitability and cash flows. “JD has demonstrated solid execution over the past few years with continued improvement in fundamentals since 2014,” he said.
JD.com reported a 29% increase in revenue last year, with net income more than quadrupling to 49.4 billion yuan, or about $7.6 billion.
Write to Dan Strumpf at daniel.strumpf@wsj.com
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Appeared in the December 23, 2021, print edition as ‘Tencent To Shed Stake in JD.com.’
