Tencent unexpectedly offloads stake in fellow Chinese giant JD.com

Surprise dividend for shareholders may also yield approval from monopoly-wary Beijing

While Chinese web giant Tencent has announced an unheralded special dividend: shares in giant Chinese e-tailer JD.com.

Tencent acquired around 15 per cent of JD.com in 2014. Now it will divest around 86.4 per cent of that stake – or 457,326,671 shares. The company’s Tencent’s filing [PDF] announcing the deal spells out that 21 Tencent shares entitles investors to one JD share.

The filing explains the timing of the dividend by explaining that Tencent likes to invest in companies until they are “consistently capable of self-financing their future initiatives.” JD.com has reached that stage, the filing explains, so shareholders deserve to benefit from Tencent’s investment.

The two companies will retain a “strategic partnership agreement”. But Tencent president Mr Lau Chi Ping Martin will leave JD.com’s board, effective today.

While Tencent will retail some JD shares, its sprawling portfolio of web, payments, entertainment, and gaming products will now feature very little interest in e-commerce.

Yet the Chinese market alone is enormous: Alibaba last week staged an investor day at which it revealed it is on track to have 864 million annual active consumers by Q2 2022, growth of 106 million in a year. The company’s presentation [PDF] about its prospects in China stated that four markets – apparel & accessories, home furnishing, consumer electronics, and fast-moving consumer goods – each added over 110 million annual active consumers in the year to September 30th, 2021.

Tencent did not explain why it is walking away from JD, and therefore from getting its own share of that enormous growth.

But it’s not hard to guess why: Chinese regulators are increasingly concerned that the nation’s web giants are too big and have too much market power across too many sectors.

Tencent knows this well, as it has been subjected to numerous new regulatory requirements during 2021 and even worn massive restrictions on, and criticism of, its lucrative gaming business.

Jumping from JD may therefore keep shareholders smiling and show Beijing that Tencent has got the message about monopolies. By doing so it may have bought the web giant the social licence it needs to focus on fields it’s most interested in dominating. ®