"Selling" 14.7% of JD.com's equity, institutions said anti-monopoly background or promoting Tencent's investment territory to "slim down"

Economic Observation Network reporter Monday Sail Tencent JD.com wants to "break up"?

On the morning of December 23, Tencent Holdings (0700. HK) announced on the Hong Kong Stock Exchange that the board of directors plans to distribute about 460 million shares of JD.com (9618.HK) held by it as an interim dividend to Tencent shareholders, and eligible shareholders will be issued 1 share of JD Group Class A common shares for every 21 shares held; after the completion of the distribution, Tencent's shareholding in JD.com will be reduced from 17% to 2.3%, no longer the largest shareholder; Tencent President Martin Lau will also step down as a director of JD.com.

According to the announcement, based on the closing price of JD Group's Class A common shares traded on the Stock Exchange on 22 December at HK$279.2 per share, the total market value of JD Group's shares is approximately HK$127.7 billion.

"It is not the first time in Tencent's history that dividends to investors have been paid to shareholders on shares of Tencent Music, as the company has distributed shares of Tencent Music to shareholders at the end of 2018. Although this form is not common, it is essentially no different from cash to shareholders, and the dividend yield is far beyond the previous level. Li Nan, a researcher at Jinzhang Investment under Geshang, told reporters.

In this regard, some insiders pointed out that Buffett's Berkshire Hathaway had also operated the model before, when the company distributed its shares in Apple to shareholders. This move is a better governance model, reflecting respect for shareholders, and achieving the effect of reducing the number of holding companies, while exiting JD.com in the form of medium-term dividends, which has also reduced JD.com's volatility in the secondary market from the perspective of liquidity and time frame.

"The data shows that Tencent's last three dividend dividends have dividend yields of 0.32%, 0.32% and 0.28%, respectively, but the dividend yield of this dividend can reach about 2.5%-3% in a rough calculation, which is actually a good thing for investors, and it can also give investors who are only optimistic about Tencent but not optimistic about JD.com a chance to choose." Li Nan said, "But on the other hand, why Tencent has significantly increased the dividend limit this time is also worth thinking about." Tencent's third quarterly report shows that the company holds 170 billion yuan in cash, and the total amount of shares in Jingdong that is distributed this time is about 100 billion yuan, so it is obviously not a lack of money. If we analyze from the perspective of equity investment, we have reason to suspect that this is no longer optimistic about JD.com's business, so as to reduce its holdings significantly. ”

Under the influence of Tencent's "liquidation" reduction news, as of the final session on December 23, the company's stock price rose by 4.24% to 461.80 Hong Kong dollars / share, while the Hong Kong stock price of Jingdong Group jumped low, falling below 250 Hong Kong dollars / share during the session, and finally closed at 259.60 Hong Kong dollars / share, a decline of more than 7%. In addition, other Tencent stocks also fell, Bilibili (9626. HK), Kuaishou (1024. HK), Meituan (3690. HK) fell by 6.48%, 3.62% and 1.65% respectively.

Yu Shilin, manager of the research department of Hong Kong Huasheng Securities, told reporters that Tencent will send JD.com stocks as dividends, and the shareholding ratio will be reduced from 17% to 2.3%, which is a significant reduction in JD.com in disguise. Tencent's shareholding value is realized and feedback to shareholders, the stock price is reasonable, and Tencent's traffic support has always been the advantage of JD.com, so it is understandable that the capital market will give a negative reaction to its stock price.

In fact, the in-depth strategic cooperation between Tencent and JD.com has lasted for nearly 8 years. In March 2014, on the eve of JD.com's U.S. stock market listing, Tencent invested heavily in JD.com, doubling JD.com's valuation from the previous round of financing. In May 2014, JD.com was listed on the U.S. stock market, and Tencent once again participated in the subscription at the issue price, becoming the largest shareholder of JD.com. As of September 30, 2021, Tencent held a 16.99% stake in JD.com.

"In the past, the non-controlling strategy of the strong alliance between Tencent and JD.com was recognized, because in the ecosystem competition of different scene models, Tencent, which lacks e-commerce genes, can make up for the shortcomings and compete with Ali in an all-round way." Nowadays, on the one hand, its own WeChat Mini Program connects users and diverts offline flow for e-commerce, compared with meituan and Tencent, the synergy effect between Meituan and Tencent is better, and there is no need for Tencent and Ali to maintain ecosystem competition under anti-monopoly, e-commerce business competition is fierce, and strategic needs have also changed. Yu Shilin pointed out.

Liu Qiangdong, Chairman of the Board and Chief Executive Officer of JD Group, also said in the announcement, "On behalf of the Group, I would like to express my heartfelt thanks to Mr. Martin Lau for the service of the Board of Directors for nearly eight years, and during his tenure on the Board, Martin Lau has provided useful assistance to the business development of JD Group with his rich experience. We look forward to continuing to maintain a close and mutually trusting strategic partnership with Tencent in the future to create greater value for shareholders and the whole society. ”

It is worth mentioning that as of the end of the third quarter, the fair value of Tencent's outbound investment was 1.2 trillion yuan. In addition to JD.com, Tencent is also an important shareholder of Internet listing platforms such as Meituan, Pinduoduo, Vipshop, B Station, and Kuaishou, with a shareholding ratio of 17.18%, 15.63%, 9.48%, 11.38% and 17.32% respectively, and ranks as the largest shareholder of Meituan. After the release of the current reduction news, the "slimming" of the company's subsequent investment map has received attention.

"Combined with the recent situation of Internet companies, as well as the Central Economic Work Conference mentioned in 'in-depth promotion of the implementation of fair competition policies, strengthen anti-monopoly and anti-unfair competition, with fair supervision to ensure fair competition', we can understand that the government's anti-monopoly policy against Internet companies will not be relaxed next year, and Tencent, as the leading enterprise of Internet companies, is cold and warm. Therefore, the reduction of JD.com and even the further reduction of other holding companies may be preparing for stricter supervision in advance. Li Nan also admitted frankly.

In Tencent's third-quarter earnings analyst conference call, Tencent's management has also publicly stated that it will continue to increase strategic investment in emerging industries, while also taking into account the return on investment and cyclical issues. Among them, the three areas of business and enterprise services, games, and short videos were highlighted. Companies have also cited challenges in terms of user experience, technology, and regulation.

Yu Shilin also predicted that the realization of Tencent's equity investment is conducive to revaluing or narrowing its intrinsic value, and investors will expect that in the future, Tencent may also sell the equity with circulating value such as Vipshop and Pinduoduo at a suitable time in the future, and distribute the proceeds to reflect the shareholder value.