On December 23, Tencent announced that the company would distribute about 460 million Jingdong class a ordinary shares held by it to shareholders as an interim dividend in the form of one Jingdong class a share for every 21 Tencent shares held. After the distribution, the proportion of JD shares held by Tencent will be reduced from the current 17% to 2.3%, and it will no longer be the largest shareholder. Meanwhile, Liu Chiping, President of Tencent, will also step down as a director of JD.
On the same day, Tencent’s share price rose 4.24% and JD Hong Kong shares fell 7.02%. Based on the closing price of JD Hong Kong shares of HK $259.6 per share, Tencent’s dividend value was about HK $119.4 billion (about 97.5 billion yuan).
This is the first time Tencent has declared an interim dividend. In the past, the company usually paid dividends throughout the year. Some media interpreted this move as a “decent break-up between Tencent and JD”.
Tencent said that after the distribution, Tencent is still JD’s strategic partner, remains confident in JD’s prospects, and its win-win business relationship with JD will not be affected. At present, the company has no plan to further reduce its holdings of JD. Meanwhile, JD also announced that it and Tencent will continue to maintain a mutually beneficial and win-win business cooperation relationship, including the existing strategic cooperation agreement.
Chen Gang, the licensed representative of ED securities and futures, told the Securities Daily that Tencent’s model of reducing holdings and paying dividends is very rare in the Hong Kong stock market and common in the US stock market, which is the standard practice of the US capital market. “One of the advantages of this model is that it can reduce taxes, which is in line with the interests of shareholders. If you directly reduce Jingdong’s shares and then pay dividends, you need to pay capital gains tax and dividend tax; second, after receiving Jingdong’s shares, shareholders can decide whether to sell them, which not only increases the liquidity of Jingdong’s shares, but also will not have a great impact on Jingdong’s share price.”
In Chen Gang’s view, Tencent’s doing so is based on various considerations. First, JD group’s business tends to mature and has reached the “stage of independent fund-raising for its own future development”, which is no longer in line with Tencent’s investment strategy; Second, it reduces the risk of being supervised by antitrust; Third, dividends through this model will not have an impact on the company’s cash flow.
“Tencent’s probability of reducing its shares in other Internet enterprises has increased, which is good for Tencent itself, and (the company’s business and value) returns to the platform itself.” Chen Gang added.
It is worth mentioning that, apart from Jingdong, Tencent also invested in many Internet companies including the US, Kwai Fu, and many other companies.
Tencent has invested in JD for nearly 8 years, witnessing JD’s successful transformation from PC to mobile Internet, and Gmv has achieved more than 10 times growth, which is a very successful investment. Chen Da, executive director of Hehe capital (Hong Kong), told the Securities Daily that from a financial point of view, the dividend timing is also very suitable. Although Tencent has continued to repurchase shares, it has also been criticized by minority shareholders for its low dividend. According to the current share price of JD, the dividend proportion of Tencent is close to 3%, which is very rich.
Chen Da believes that fundamentally, the change in the relationship between Tencent and JD originates from the change in the pattern of the Internet industry. “Previously, Tencent’s strategic investment in e-commerce platform was partly due to the check and balance of Alibaba. With the industry reform in recent years and the rise of Tencent applet, its own e-commerce channel has begun to take shape. At the same time, Tencent’s basic platform is still social, and the important strategic focus in the future will be on the level of the whole universe.”
From the perspective of Tencent’s latest investment direction, in December this year, Tencent just participated in the round a financing of 2 billion yuan of GPU chip R & D company molthread. Previously, Tencent also continued to participate in multiple rounds of early financing of chip manufacturing enterprise Suiyuan technology; In addition, Tencent also invested strongly in the field of medical and health care in 2021. It not only participated in the strategic investment of Hua yilejian, a high-tech biopharmaceutical enterprise, but also invested in the early financing of Frontier Biotechnologies Inc(688221) technology enterprises such as Ruixin intelligent medicine and Jimu biology, a drug R & D manufacturer.
(Securities Daily)
