Yesterday, $TENCENT(00700)$ announced a plan to distribute $20 billion of stock in meal delivery giant $Meituan(03690)$ in dividend. Meituan dived as much as 7.27%.
A year ago, Tencent distributed $JD-SW(09618)$ in the same way.
In December 2021, Tencent said it would pay out a $16.4 billion dividend by distributing most of its JD.com stake. JD.com shares plunge as much as 11.2%, Tencent up 4%
In addition, Tencent also unexpected divested $Sea Ltd(SE)$ this year.
In January, Tencent divested 2.6% of equity interest in Sea. Tencent has sold 14.5 million shares of $Sea Ltd(SE)$ at $208 each to raise $3 billion. Sea dropped 11.4% after the news.
1. How will Meituan perform after the distribution?
Although Meituan's share price may be under pressure in the short term, it won't plunge as $ JD.COM Group -SW(09618)$. Meituan are more liquid than $JD.com(JD)$ in the Hong Kong stock market, and its business certainty is higher.
Since the pricing power of Hong Kong stocks is still in the hands of international institutions, their feedback has a greater impact.
$Meituan(03690)$ may face a possible sell-off in March, 2023.
Hedge funds need to rebalance their portfolios in March. After the dividend, Tencent's weight may be reduced due to dividends, hedge funds need to buy more;
if they think Meituan's weight is too high, they will also sell it. In addition, the index will be adjusted to introduce more passive capital variables.
2. After JD, Sea, and Meituan, which company would Tencent divest next?
Market worries about further divestments from its significant holdings of Chinese tech shares.
Tencent's divested $JD.com(JD)$ and $Meituan(03690)$ mainly because of the "anti-monopoly" policy in China. Tencent intended to weaken its ties to the e-commerce firm.
After paying dividends, Tencent lost its status as the largest shareholder of JD.COM and Meituan.
After dividend distribution, Tencent's shareholding in JD.COM will be reduced from 17% to 2.3%; The shareholding ratio of Meituan will be less than 2%.
Tencent is important shareholder of these head enterprises: $Pinduoduo Inc.(PDD)$, $KUAISHOU-W(01024)$, $BILIBILI-W(09626)$, and $DiDi Global Inc.(DIDIY)$.
1) $Sea Ltd(SE)$ - not likely
Some investors also questioned whether Tencent will sell Sea shares as it still owns 18% of the shares after selling in January.
Based on the anti-monopoly logic of Tencent's reduction of China enterprises, $Sea Ltd(SE)$ will not be sold in the short term.
2) PDD vs. Kuaishou
$Pinduoduo Inc.(PDD)$ and $KUAISHOU-W(01024)$ have e-commerce business like JD.COM. They are more likely to be sold off.
Analysts believe that
according to Tencent's standards, Meituan, Pinduoduo, Kuaishou, etc. all have "the ability to raise funds by themselves". Pinduoduo may be the next one to be divested next year.
However, $Pinduoduo Inc.(PDD)$ is not listed on the Hong Kong stock market. It is not cost-effective to distribute the US stocks to HK investors.
Then the next one may be $KUAISHOU-W(01024)$ , where e-commerce is constantly developing.
Do you think Sea will be sold by Tencent?
Which company will be divested next?
Are you bullish on Tencent?
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