Tencent reduced its stake in JD.com, and JD.com's new three-year contract at the WeChat portal is about to start negotiations

Wen 丨 "Late Finance" Gong Fangyi

Tencent has built a digital business alliance through investment that has penetrated into many fields such as catering, retail, entertainment, and education.

But with Tencent announcing on December 23 that it will give a significant portion of its business alliance — a $16.4 billion stake in JD.com — to more than 800 institutions and potentially hundreds of thousands of individual shareholders behind them, the Chinese Internet may not have a similar alliance.

Tencent reduced its stake in JD.com in the name of paying special dividends. This generosity reduced its stake in JD.com from 17% to 2.3%. Tencent President Martin Lau also announced that he will immediately resign as a director of JD.com Group.

Both sides stressed that they remained important partners in each other. Tencent said in the statement, "Tencent's long-term investment strategy has never changed, tencent is still a strategic partner of JD.com after the allocation, and is still full of confidence in JD.com's prospects, and the win-win business relationship with JD.com is not affected, and the company has no plans to further reduce its holdings in JD.com." ”

Analysts at investment bank Bernstein say there is reason to believe Tencent is doing so to reduce risk.

This year, the government has repeatedly strengthened anti-monopoly and prevented the disorderly expansion of capital. In October, the draft amendment to the Anti-Monopoly Law was submitted to the Standing Committee of the National People's Congress for deliberation. During the year, Tencent, Alibaba, Baidu, Meituan and other Chinese Internet platforms were subject to anti-monopoly penalties.

Tencent's quarterly report shows that as of the end of September, its portfolio is worth more than $188 billion, including more than $11 billion worth of Pinduoduo, more than $35 billion worth of Meituan, more than $7 billion worth of Kuaishou, etc., platform companies that have accelerated their growth with WeChat traffic. While transforming the industry and promoting economic vitality, these companies also take profits from transactions completed by using the platform.

According to some media reports, a person familiar with Tencent's management said that Tencent has no intention of cutting or withdrawing from companies such as Meituan and Kuaishou in the next few months.

The market's very different reaction to Tencent and JD.com, Meituan, Kuaishou and other invested companies also somewhat illustrates their expectations that the alliance will no longer be there. After the announcement of the reduction, Tencent's stock price jumped and the stock prices of JD.com, Meituan, and Kuaishou fell. At one point, JD.com fell more than 10% at the height of its momentum.

People close to JD.com told LatePost that JD.com's new three-year contract at WeChat is about to start negotiations.

According to the announcement that the original contract expired on May 27, 2022, Tencent provided JD.com with prominent primary and secondary entrances on the WeChat platform, and the two sides will continue to cooperate in social media services, advertising purchases and membership services.

According to the current statements of both sides, JD.com has a high probability of getting traffic entrance on WeChat. But whether or not you can get the first-level entrance, at what cost, is unknown.

No matter how much Tencent holds, the importance of WeChat has not changed.