Large-scale reduction of JD.com equity, why does Tencent not want to be a "big brother"?

Overnight, Tencent was no longer JD.com's largest shareholder. However, the two sides stressed that the strategic cooperative relationship remained unchanged.

Wen | Li Yanyan, a reporter for China Entrepreneur

Editor| Li Wei

The source of the head image | Visual China

A paper announcement fell, and Tencent "waved goodbye" to JD.com.

On the morning of December 23, Tencent announced that it would release about 460 million shares of JD.com equity it held to shareholders in the form of an interim dividend. After the dividend, Tencent's shareholding in JD.com will be reduced from 17% to 2.3%, no longer the largest shareholder, and Tencent President Martin Lau will also step down as a director of JD.com.

JD.com also announced on the same day that Martin Lau has resigned from the company's board of directors. Martin Lau has been a member of the Board of Directors and a member of the Remuneration Committee of JD Group since March 2014. JD.com expressed its heartfelt thanks to Martin Lau for serving the company's board of directors for nearly eight years, and looks forward to continuing to maintain a close and mutually trusting strategic partnership with Tencent.

Tencent reduced its holdings in JD.com shares, and the capital market gave a different response. AT one point, JD.com plunged more than 10 percent intraday, while Tencent Holdings rose sharply during the session. As of the noon break on December 23, JD Group's Hong Kong stocks were trading at HK$259.400, down HK$19.800, down 7.09%, and Tencent Holdings was trading AT HK$460.800, up HK$17.800, or 4.02%.

Tencent's sudden large-scale reduction in JD.com shares has also triggered many speculations in the industry.

Some people believe that this may mean that Tencent is no longer optimistic about JD.com, and even the entire e-commerce track behind it, intending to find new business growth points; some industry insiders believe that Tencent's reduction in holdings is actually the trend of the times, which is closely related to the regulatory requirements of the recent "anti-monopoly".

Almost eight years ago, Tencent invested in JD.com for the first time, and the original e-commerce businesses such as Paipai were also merged into JD.com, and then participated in jd.com's IPO subscription. After the reduction, Tencent told China Entrepreneur that the company will continue to maintain a mutually beneficial and win-win business cooperation relationship with JD.com, including the existing strategic cooperation agreement. In addition, "at present, the company has no plans to further reduce its holdings in JD.com."

"If you are not careful, you have switched to JD.com." After the news of Tencent's reduction in JD.com was exposed, some investors joked with each other on the interactive platform.

According to the announcement, a special interim dividend of 457,326,671 JD A common shares indirectly held by Tencent indirectly by Tencent through Huang River will be distributed in kind on the basis of 1 JD A ordinary share for every 21 shares held by eligible shareholders. This means that Tencent shareholders who have acquired JD.com shares in this distribution will become shareholders of JD.com.

Dividends from listed companies usually come in two forms: dividends and dividends, the difference being that one is issuing shares and the other is discovering gold. In the view of Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, Tencent's dividend to shareholders in the form of distributing jd.com shares held by tencent is much better than the way to pay dividends to shareholders after a large reduction in JD.com shares.

"Overall, it is a multi-party favorable dividend payment scheme." Bai Wenxi commented, "On the one hand, because JD.com is a high-quality blue-chip stock, Tencent shareholders can share the company's investment results, and on the other hand, they can reduce the use of their own cash and affect JD.com's stock price." After the dividend was paid on behalf of JD.com stocks, the liquidity of JD.com stocks increased, which helped the stock price rise. ”

Despite all the buzz, this type of dividend payment is not an isolated case in the market.

In the U.S. stock market, Buffett's shares in Apple have also been distributed to shareholders. In the eyes of industry insiders, this is a relatively good governance model, which not only reflects the respect for shareholders, but also achieves the effect of reducing the shares of the company holding the company. Another industry insider estimates that this dividend can save Tencent hundreds of billions of cash.

For JD.com, the resignation of Martin Lau will not affect JD.com's corporate governance capabilities and status. After Tencent "let go", JD.com's shareholding structure will be more decentralized, "which in turn will enhance Liu Qiangdong's right to speak and control over JD.com." Bo Wenxi said.

Tencent and JD.com both said in the announcement that the strategic cooperative relationship between the two sides has remained unchanged since then. Tencent said that after the assignment, Tencent is still a strategic partner of JD.com, and is still full of confidence in JD.com's prospects, and the win-win business relationship with JD.com is not affected. JD.com also stressed that the two sides will continue to maintain a mutually beneficial and win-win business cooperation relationship, including the existing strategic cooperation agreement.

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

Liu Qiangdong added: "We are also eagerly looking forward to many Tencent shareholders becoming our new shareholders. We are proud of the new supply chain-based brick-and-mortar business model we have established over the past 18 years, as well as our long-standing business values of right path and success. We believe we have the ability to create long-term value for a larger group of shareholders. ”

Bai Wenxi analyzed that the decline in Tencent's shareholding and shareholding ratio in JD.com will not affect the development of the specific business of the two sides, because the effect of sharing traffic between the two sides is actually not obvious. Another close person said that JD.com has not relied so much on Tencent's traffic in recent years.

Tencent is not only the largest shareholder of JD.com, but also the largest shareholder of Meituan and the second largest shareholder of Pinduoduo. Relaxed to the entire technology industry, Tencent's investment and even holding territory is broader. This inevitably leads to speculation that after JD.com, Tencent will operate its stakes in other companies in the same way.

A person close to the reduction of holdings revealed to China Entrepreneur that Tencent's reduction is indeed related to the regulatory requirements for anti-monopoly. Why the first object will choose JD.com, is that the latter is the smallest fluctuation in the stock price of Tencent's listed companies, and choosing to reduce its holdings in JD.com has the least impact on Tencent's stock price fluctuations.

Bai Wenxi told China Entrepreneur that after Tencent pays dividends on behalf of JD.com stocks, it can greatly reduce Tencent's shareholding ratio in JD.com and reduce the doubts that the market Internet giant Tencent and JD.com have formed an alliance to form a monopoly.

In the past ten years, the Internet platform represented by Tencent and Ali has developed rapidly, and the "enclosure movement" has continued continuously. There are strategic and business considerations, as well as disorderly expansion of capital. Today, under the tide of anti-monopoly, the response has been opened. For example, weChat and Taobao's "wall demolition" campaign. Earlier, the Tencent-led Douyu Huya merger was terminated in July this year, bringing game live competition back to a virtuous circle according to regulatory requirements.

The transfer of JD.com's equity is not only an inevitable choice for Tencent in the external environment, but also related to its own strategic direction. Some industry insiders said that Tencent saw signs of lack of online growth, coupled with opposition to the disorderly expansion of capital, just to take this opportunity to withdraw some investment, reduce the investment territory, and more importantly, "Penguin (Tencent) itself also needs to adjust the direction of investment."

Bai Wenxi reminded that after the lack of online growth, there are still many tests for Internet giants. For example, how to adapt to the pressure of the anti-monopoly new policy, and how to maintain sustained innovation and development capabilities and performance growth, "the future growth space is still the expansion of the online field and the improvement of market share, on the other hand, it may also need to carry out necessary alliances and innovations with offline." ”

"Investing in high-quality management teams and best-in-class companies, supporting their autonomous growth and innovation, and pursuing synergies that add value to users enable Tencent to focus internal resources on innovation in its core business." In 2014, Tencent said when disclosing its investment strategy in its earnings report. Tencent also said that when the invested enterprises have the ability to continue to self-raise funds, they choose to withdraw from the investment under appropriate circumstances, and Tencent's "long-term investment" strategy has never changed.

According to public information, since Tencent first invested in JD.com in 2014, JD.com has successfully transformed from PC to mobile Internet, and GMV (total transaction volume) has achieved more than 10 times growth. Today, JD.com has a market value of more than 100 billion US dollars, successfully listed in Hong Kong for the second time last year, and its spin-off business also has the ability to independently raise funds.

Recently, Tencent has tended to invest in hard technology and healthcare. For example, in the field of hard technology, in December this year, Tencent participated in moore threads 2 billion yuan in series A financing (GPU chip research and development company). Previously, Tencent also continued to participate in several rounds of early financing of chip manufacturing company Fuyuan Technology.

In the field of medical and health care, in 2021, Tencent participated in the strategic investment of Huayi Lok Health, a high-tech biopharmaceutical company founded only two years ago, and also invested in the early financing of cutting-edge biotechnology companies such as Ruixin Intelligent Medical and Drug Development and Development Manufacturer Jimu Biotech.

Liu Zheming, a reporter for China Entrepreneur, also contributed to this article