Prosus Decelerates Selling of Tencent's Shares While Tencent Offsets the Stock Loss with Earnings Growth and Share Buybacks

 

On December 9, the Hong Kong Stock Exchange disclosed that on December 6, Tencent's major shareholder and a subsidiary of Dutch Prosus, South Africa's Naspers Limited sold 474,000 Tencent shares in the Hong Kong stock market at an average price of $52.74 per share. Now, Prosus's shareholdings of Tencent is 2.224 billion, dropping from 24.01% to 23.99%.

 

Compared with the past, Prosus's share reduction has slowed down. From April to September 2024, it reduced about 70,586,100 Tencent shares, cashing out $3.3 billion, and withdrew another 26,424,500 shares from October to November, dropping its stake to about 2,227 million shares.

 

Prosus' plan to reduce its stake in Tencent dates back to June 27, 2022. According to Tencent's announcement, Prosus and Naspers announced their repurchase program for their asset value increase. The repurchase fund stems from the continuous micro sales of Tencent shares by Naspers. According to data, Prosus' sale may mean to address the inversion between its own market capitalization and asset value.

 

Tencent (HKG: 0700) relied on solid performance and stock buybacks to offset the shareholder reductions. This November, Tencent released its third-quarter report, with third-quarter revenue of $23.9 billion, up 8% year-on-year but below market estimates, and third-quarter profit of $7.7 billion, up 47% YoY and above market expectations. Tencent's three core main businesses all achieved solid growth.

 

The report also revealed that Tencent repurchased 94.9 million shares on the Hong Kong Stock Exchange for approximately $4.62 billion from July to September. Tencent's share repurchases were followed by share cancellations. Hence earnings per share have improved; the total equity decreases constantly. Tencent explained that the canceled buybacks intended to increase long-term shareholders value.

 

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