Tencent Holdings Limited (TCEHY)

[JohnCM]

Tencent loses $17.5B in market cap

Jul. 4, 2017 5:47 PM ET
By: SA Eli Hoffmann, SA News Editor

Tencent Holdings, operator of China’s dominant social network and publisher of the world’s most popular role-playing mobile game, plunged in Hong Kong trading today after China communist party mouthpiece the People’s Daily newspaper described its Honour of Kings game as “poison” and “drug” that’s harming teenagers.

Shares dropped as much as 5.1%, wiping out nearly $17.5B in market value.

The People’s Daily criticized Tencent’s most profitable smartphone title in an editorial, citing it as an example of how addictive games spread “negative energy” and have even led to deaths. The harshly worded piece came after China’s biggest messaging and games company declared curbs on playing time for the minors among the game’s estimated 100M+ monthly active users.

"The article leads to concern that China may step up regulation on mobile games. In particular, limiting young kids’ access to these games," said Paul Pong, managing director at Pegasus Fund Managers in Hong Kong.

However, Marie Sun, an analyst with Morningstar, says the game’s universal popularity means the latest government push in China shouldn’t have a major impact on Tencent’s revenue in the longer run. “Honour of Kings has a diversified player base, not only primary or middle school students. There are a lot of older players who will continue playing. And even players who are of a younger age will figure out ways to keep playing the games."