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Tencent Defies Regulator Warning with Metaverse Patent Application
By: FX Empire | March 4, 2022
Key Insights:
• Tencent goes deeper into the Metaverse with new patent applications for virtual concerts.
• In 2020, Tencent bought a stake in U.S virtual concert platform Wave in a bid to dominate the virtual concert stage.
• Chinese regulatory scrutiny could leave the Chinese music industry in the wake of Metaverse-friendly nations.
Over the last few months, the Chinese government and the People’s Bank of China (PBoC) have been critical of NFTs and the Metaverse. The shift in focus follows last summer’s ban on Bitcoin (BTC) mining.
A marked increase in NFT activity and interest in the Metaverse has forced Chinese conglomerates to make a move despite condemnation from the government and the PBoC.
China Giant Tencent Files Metaverse Patent Application
This week, Chinese tech giant Tencent reportedly filed a patent for virtual concerts. The virtual concerts patent application follows China’s first virtual concert on 31st December. Tencent held the “TMELAND” concert in the Metaverse to ring in the New Year. A reported 1.1m fans saw the New Year concert.
Immensely successful, Tencent continues to ignore the warnings of the Chinese government and the PBoC. Looking to diversify away from China, Tencent Music acquired a stake in Wave in late 2020. Wave is an LA-based virtual concert platform.
Past Waves include Justin Bieber, Pentakill, Dillon Francis, The Weeknd, and John Legend.
Patent Applications Come Despite Government Warnings
NFT and Metaverse-related trademark and patent applications have continued to surge in China. The surge comes despite a jump in illicit activity and government warnings.
In December, we reported that the PBoC clamped down on NFTs and the Metaverse using AML tools. The PBoC’s AML unit sees virtual assets as a pathway for illegal activities facilitated by the isolated nature of NFTs and metaverse-based items.
Just over 100 companies had registered for trademarks related to the Metaverse before a late 2021 surge. In addition, more than 1,300 Chinese companies reportedly filed for trademarks by late December. Other major Chinese companies filing for trademarks included Huawei Technologies, NetEase, and Hisense.
Since December, firms have not let up. By mid-February, a reported 16,000 trademark metaverse-related applications were pending approval in China. This was up from just under 9,000 in mid-December.
Whether China’s regulator approves all 16,000 remains to be seen. With competition rife, however, China could fall behind should the likes of Tencent receive a cold shoulder at home.
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U.S. adds e-commerce sites operated by Tencent, Alibaba to 'notorious markets' list
By: Reuters | February 17, 2022
(Reuters) - E-commerce sites operated by China's Tencent Holdings (OTC:TCEHY) Ltd and Alibaba (NYSE:BABA) Group Holding Ltd were included on the U.S. government's latest "notorious markets" list of entities that allegedly sell or facilitate the sale of counterfeit goods, the U.S. Trade Representative's office said.
The list identifies 42 online markets and 35 physical markets that are reported to engage in or facilitate substantial trademark counterfeiting or copyright piracy.
"This includes identifying for the first time AliExpress and the WeChat e-commerce ecosystem, two significant China-based online markets that reportedly facilitate substantial trademark counterfeiting", the USTR office said in a statement.
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Tencent (TCEHY) backs Oxford start-up’s quest for ‘holy grail’ of energy
By: Rachel Millard | February 13, 2022
• An Oxford University spin-off trying to crack the “holy grail” of energy production has raised $45m (£33m) from investors including the Chinese technology giant Tencent.
First Light Fusion is among the leaders in the global race to produce energy through nuclear fusion, which offers the prospect of abundant clean energy.
Shenzhen-based Tencent is investing in First Light for the first time, as is private investment firm Braavos Capital. Existing investors Oxford Science Enterprises, Hostplus and IP Group have also backed the fundraise. It brings the total outside backing for the venture, founded in 2011, to $107m.
Scientists have been trying to develop nuclear fusion for decades and the quest has taken on extra urgency in the push to cut carbon emissions.
The process involves fusing two atoms at very high temperatures, which then release huge amounts of energy. The reaction powers the Sun.
But creating the necessary conditions - including extreme temperatures of 100 million degrees Celsius and high pressure - for the process is extremely difficult.
Kidlington-based First Light Fusion is developing a process which triggers the conditions by firing a projectile at extreme high speeds into a fuel pellet.
Last year it installed a 22-metre, 25,000kg gas gun which fires a 100g projectile at 6.5km/second - about twenty times the speed of sound.
Welcoming the new funding, chief executive Dr Nick Hawker said: "We remain very confident in our technology, our people and the potential of our unique approach.
"We continue to believe our inertial confinement approach offers the fastest and above all, most cost competitive route to grid ready fusion energy.”
Funding for First Light Fusion comes after researchers at the JET laboratory in Culham, near Oxford, last week set a record for the amount of fusion energy produced.
Researchers achieved 59 megajoules of sustained fusion energy, well above the 22 megajoules achieved in 1997, albeit only enough to boil about 60 kettles of water...
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Cathie Wood's ARK Invest Buys 1,127 Shares of Tencent Holdings Limited (TCEHY)
By: Markets & Mayhem | February 1, 2022
• Cathie Wood & Ark Invest's trade activity from today 2/1
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Cathie Wood's ARK Invest Sells 414,839 Shares of Tencent Holdings Limited (TCEHY)
By: Ark Invest Daily | January 31, 2022
• Cathie Wood & Ark Invest's trade activity from today 1/31
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Tencent plans to take U.S.-listed streaming firm DouYu private -sources
By: Reuters | January 27, 2022
Tencent Holdings Ltd (0700.HK) plans to take DouYu International Holdings Ltd private amid disagreements over strategy among executives at the Chinese videogame streaming firm, two people with direct knowledge of the matter said.
Tencent, the biggest shareholder in Nasdaq-listed DouYu with a 37% stake, wants to team up with at least one private equity firm for the deal and is currently talking to investment banks, they said.
It is aiming to complete the deal this year, said one of the people.
Shares in DouYu, one of Tencent's main platforms for game marketing and China's No. 2 videogame streaming site, surged on the news, jumping 12.7% in pre-market trade.
The company has been debating its business strategy after Tencent's plans to merge it with bigger rival Huya Inc (HUYA.N) were blocked by regulators in July last year on antitrust grounds.
There have been differences among DouYu executives over whether to stick with game livestreaming as its core business or shift towards more profitable entertainment livestreaming, said the other person.
That tension has not abated even after DouYu co-founder and co-CEO Zhang Wenming, who had favoured diversifying revenue streams, resigned last month, the person added. DouYu has said Zhang's departure was due to personal reasons. Co-founder Chen Shaojie now runs the company.
The take-private plans reflect Tencent's desire to have a firm grip on its core gaming affiliates at a time when it faces a raft of regulatory issues, said the people, who were not authorised to speak on the matter and declined to be identified.
A 60% slide in DouYu's stock price since July, giving it a market value of $717 million on Wednesday, has also meant it is attractively priced for a take-private deal, they added.
Tencent and DouYu declined to comment. Zhang and Chen did not immediately respond to a request for comment made via DouYu.
Tencent, owner of hit games "Honor of Kings" and "PUBG Mobile", has like other Chinese internet firms been grappling with a regulatory crackdown on the sector and in the third quarter posted revenue growth of just 13% -its slowest since it went public in 2004.
In addition to the blocking of the DouYu-Huya deal, it has also had to contend with efforts by authorities to rein in gaming by minors, while curbs on other industries have also dampened advertising appetite.
At the same time, competition is growing both at home and globally.
ByteDance, owner of Douyin, the domestic version of Tiktok, and which also has a games unit, has made sizeable inroads into the video games business. Microsoft Corp (MSFT.O) last week said it would acquire "Call of Duty" maker Activision Blizzard (ATVI.O) for $68.7 billion in cash - the biggest gaming industry deal in history.
New rules in the offing from China's cyberspace regulator will also require the nation's big internet companies to seek approval for new investments and fundraising, sources have told Reuters. The regulator has denied issuing a document to that effect.
"In such a challenging regulatory and competitive environment, it is becoming more important for Tencent to strengthen the control of existing gaming-related portfolio companies such as DouYu," said the second person.
There have been some $13.7 billion in take-private deals for U.S.-listed Chinese companies over the past two years, compared to a combined $5.8 billion for 2018 and 2019, according to Refinitiv data.
Undervalued shares and increased scrutiny by U.S. regulators have often been cited as reasons for the deals. The average premiums paid by buyers jumped to 53% last year from 36% in 2020, the data showed.
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Tencent's 2022 strategy indicates a downsizing of vast tech empire to ride out China's regulatory storm, fuel new growth
By: Yahoo | January 14, 2022
Chinese internet giant Tencent Holdings may opt for more divestments and pursue fewer acquisitions this year, according to analysts, in the wake of Beijing's tightened regulation of the country's Big Tech companies.
Tencent founder, chairman and chief executive Pony Ma Huateng signalled such a low-key future for the company, which runs the world's biggest video gaming business by revenue and China's largest social media platform through super app WeChat, during his speech in a year-end meeting with employees and after the firm's move to offload stakes in e-commerce providers Sea and JD.com.
During that meeting, Ma said Tencent should do its job without crossing any lines and reiterated the firm's commitment to serve as an "assistant and connector" for the country and society, according to a report by online Chinese media outlet LatePost.
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That showed Tencent's resolve to "follow the laws, keep a low profile, [and] survive [current] restrictions" amid the regulatory storm that has swept China's technology sector since late 2020, said Chinese equities analyst Ming Lu from Aequitas Research. He indicated that Tencent will continue to divest shares in selected investee companies and slow down corporate acquisitions, especially on the mainland.
Tencent, with a tech empire that touches the digital lives of nearly all of China's more than 1 billion internet users, has been actively investing in a wide variety of companies. These holdings amount to US$130 billion, with US$80 billion held in publicly listed companies, according to Bloomberg data.
Shenzhen-based Tencent, however, remains under pressure to address issues related to data security and video games, as Beijing seeks to curb the influence of Big Tech firms. China's market watchdog fined Tencent multiple times last year for failing to disclose past mergers and acquisitions deals.
Last August, Tencent's music streaming business terminated all exclusive licensing deals with global record labels to abide by an order of the State Administration for Market Regulation (SAMR).
While Beijing hinted at its intention to ease up the crackdown on Big Tech during the annual central economic work conference in December, there are no guarantees. Earlier this month, the SAMR slapped fines on Alibaba Group Holding, Tencent and Bilibili for failure to disclose certain business deals. Alibaba owns the South China Morning Post.
Under Beijing's forceful clampdown, China's tech giants fell in line
"Regulatory pressure from China's anti-monopoly push may have played a role in Tencent's decision to offload most of its JD.com stake," said Matthew Kanterman, a senior equity analyst at Bloomberg Intelligence, in a research note last week. That may signal a similar course of action for Tencent's investments in "Meituan, [Pinduoduo] and peers operating in e-commerce", he said, adding that Kuaishou Technology could be another candidate for divestment.
Tencent has a 15.6 per cent shareholding in e-commerce provider Pinduoduo, owns 19.4 per cent of on-demand delivery services giant Meituan, and has a 21.6 per cent stake in short video app operator Kuaishou.
Tencent founder Pony Ma warns company is replaceable in leaked speech
In spite of Beijing's scrutiny, Tencent last year continued to pursue strategic investments, closing 268 deals as of December 24, according to data from information services provider ITJuzi. It said that total was already the highest in Tencent's history, surpassing the 175 deals the company made in 2020.
Ivan Su, an equity analyst at Morningstar, also expects Tencent to continue trimming its stake in mature investee companies, but dismissed the influence of tightened regulation. He said Tencent has regularly divested its interest in companies over the past three years - averaging 20 billion yuan a year - to lock in profits when the company saw fit to do so.
China's recent regulatory initiatives targeted certain business behaviour, rather than ownership, according to Su, adding that such actions were not made to clamp down on Tencent's external investment strategy.
"We are seeing very strong deal flows for Tencent in 2021 and early 2022," he said. "We do not see anything that will hinder Tencent's ability to invest at the same pace it did over the past years."
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Tencent Nears Deal for Smartphone Maker in Major Metaverse Push
By: Bloomberg | January 10, 2022
Tencent Holdings Ltd. is nearing a deal to acquire Chinese gaming handset maker Black Shark, a move that could help the tech behemoth further its ambitions for the metaverse, people with knowledge of the matter said.
Tencent has begun talks to buy Black Shark, a niche maker of gaming phones and accessories, according to the people, asking not to be identified as the information hasn’t been made public. The smaller firm, whose investors include Xiaomi Corp., will pivot to making virtual reality headsets for its new parent after the deal, one of the people said.
Representatives for Tencent, Black Shark and Xiaomi didn’t immediately respond to requests for comment. The potential acquisition was previously reported by local trade publication 36Kr.
Alongside global giants like Facebook owner Meta Platforms Inc., China’s largest tech firm is a contender in the race to develop the metaverse, conceived as a virtual environment where people can interact with the internet and others. In a recent earnings call, Tencent President Martin Lau called the metaverse “a real opportunity” though he cautioned that the concept may take longer than expected to bring into reality.
Read more about Tencent’s metaverse opportunities
Developing specialized hardware is one of the key pillars to realizing the metaverse. Meta was one of the earliest movers, buying VR headset maker Oculus in 2014, while top Chinese rival ByteDance Ltd. last year purchased Pico, a domestic VR headset maker.
Black Shark, a little-known startup that calls its users members of the “Rebellion,” sells its stylized phones as well as a plethora of accessories such as controllers in China, Europe and India. Last year, Tencent collaborated with Black Shark on a gaming phone that optimizes effects for the former’s flagship title Peacekeeper Elite.
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Tencent Keeps Selling Parts of its Portfolio
By: TheStreet | January 7, 2022
• Moves come as pressure from Chinese regulators on big tech names continues, Real Money's Alex Frew McMillan says.
Tencent Holdings (TCTZF), the video game maker and operator of Chinese mega-app WeChat, continues to rationalize its investment portfolio, with the sale of a portion stake in Singapore-based game maker and e-commerce operator Sea Ltd. (SE).
The move comes at a time when Tencent is curbing its positions in numerous portfolio companies and as the Chinese government continues to pressure larger technology companies to toe the leadership line.
“One of the Chinese Communist Party's main concerns is anticompetitive behavior by Chinese Internet and technology operators,” Alex Frew McMillan wrote recently on Real Money. “The walled-off Chinese Internet space has split into investment camps, where Tencent has a stable of companies that are its investment universe.”
He added that “It's not uncommon for such companies to require investors to concentrate share ownership only in their stable of companies if they want access to future hot stock offerings in that stable.”
Officially, Tencent (HK0700) is raising US$3.0 billion by reducing its holding in Sea from 21.3% to 18.7% with the sale of 14.5 million Class A shares. Tencent sold the shares at US$208, according to a term sheet seen by Reuters. “That means Tencent sold the shares at the lower end of the US$208 to US$212 indicative range,” said TheStreet’s Alex Frew McMillan in Real Money recently.
Last month, Tencent said it would sell 86.4% of its holding in the Chinese e-commerce site operator JD.com (JD).
“Tencent opted to return the cash from the sale of 457.3 million shares in JD (HK:9618) to shareholders in the form of a special dividend,” McMillan said. “At the Hong Kong share price of HK$279.20 at the time of the sale announcement, the sale would be valued at HK$127.7 billion (US$16.4 billion).”
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Sea Slumps as Tencent Moves to Cut Voting Stake Below 10%
By: Investing.com | January 4, 2022
• Stock in gaming and e-commerce firm Sea (NYSE:SE) plunged nearly 7% in Tuesday’s premarket trading after Tencent Holdings' (OTC:TCEHY) decision to cut its voting stake to below 10% left it without the support of one of its top backers.
Tencent (HK:0700) stock closed 0.8% lower in Hong Kong.
The Chinese company and its affiliates, which together hold over 21% stake in Sea, have given notice to convert all their class B ordinary shares into class A, according to a statement by Sea. It did not mention the size of the voting stake previously held by Tencent.
However, once complete, the move will lead to Forrest Li, the founder, chairman and CEO of southeast Asia's most valuable company, having around 57% of voting rights in the company, up from 52% currently.
Sea is proposing to increase the voting power of each class B ordinary share to 15 votes from three.
The development marks Tencent’s second withdrawal from an online platform in less than a fortnight, against a backdrop of increasing pressure on China's biggest Internet groups from antitrust regulators. Last month, it said it will distribute about 457 million shares of JD.com (NASDAQ:JD), worth over $16 billion, in the form of a special dividend to its own shareholders. The exercise will cut Tencent’s holding in JD.com to 2.3% from 17%.
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China's Tencent builds stake in UK digital bank Monzo
By: Reuters | December 31, 2021
Chinese gaming and social media company Tencent Holdings (OTC:TCEHY) Ltd has taken a small stake in Britain's Monzo as part of a fundraising, the digital bank said on Friday, just weeks after it fetched a valuation of $4.5 billion.
Monzo did not disclose details of Tencent's stake, but Sky News earlier on Friday reported that the Chinese firm was investing a minority of a $100 million capital injection, citing a source close to the process.
Tencent did not immediately respond to a Reuters request for comment.
Founded in 2015, Monzo is a high-profile neobank with more than 5 million customers but has struggled to turn a profit, with annual losses widening last year as it disclosed it was facing a potential civil and criminal money laundering probe.
Earlier this month, Monzo received funding from investors such as Abu Dhabi Growth Fund and Coatue.
Tencent holds stakes in major U.S. tech companies, including electric-car maker Tesla (NASDAQ:TSLA) Inc and photo-messaging app maker Snap Inc (NYSE:SNAP).
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Tencent to transfer $16.4 billion JD.com stake to shareholders
By: Reuters | December 22, 2021
Gaming and social media giant Tencent will distribute most of its JD (NASDAQ:JD).com stake worth HK$127.69 billion ($16.37 billion) to its shareholders, losing its title as the e-commerce firm's top shareholder.
Tencent said on Thursday it was the right time to transfer its stake given that JD.com has reached a stage it can self-finance its own growth. The owner of WeChat will see its stake fall to 2.3% from around 17%.
JD.com, in a separate statement, said it would continue to work with Tencent, including on their strategic partnership agreement.
Eligible Tencent shareholders will be entitled to one share of JD.com for every 21 shares they hold and in total Tencent will distribute 457.3 million shares.
After the transfer, Walmart (NYSE:WMT) will become JD.com's largest shareholder, according to Refinitiv ownership data.
($1 = 7.7996 Hong Kong dollars)
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Tencent buys 'Back 4 Blood' studio Turtle Rock
By: Engadget | December 17, 2021
Tencent has added another notable game developer to its roster after buying Slamfire, the parent company of Turtle Rock Studios, for an undisclosed sum. The studio is behind Left 4 Dead, Evolve and, most recently, Back 4 Blood. Co-founders Phil Robb and Chris Ashton will continue to run the studio.
"By joining the Tencent family, we will not only get access to their vast resources and expertise, but we have found a partner who is encouraging us to be ambitious and visionary," Turtle Rock wrote in a blog post. The studio said it's expanding its team to support Back 4 Blood and create more multiplayer experiences. It added it will be able to do something new: "turn a universe we created into a true long-standing AAA franchise."
Tencent has made more major strides in the gaming sphere this year. It acquired LittleBigPlanet 3 developer Sumo Group this summer for $1.26 billion. As analyst Daniel Ahmad notes, the company has bought or invested in more than 100 gaming-related companies in 2021 alone. For instance, it took stakes in Remedy Entertainment and Life is Strange studio Dontnod.
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Tencent boosts Prosus profit, e-commerce trading loss widens
By: Reuters | November 22, 2021
AMSTERDAM/JOHANNESBURG (Reuters) - Prosus, which owns a $175 billion minority stake in Chinese internet gaming and social media group Tencent, posted an 8% rise in first-half trading profit to $2.9 billion as revenue rose rapidly in its overall portfolio.
Sometimes compared to SoftBank and its Vision Fund, Prosus NV, owns stakes in a wide range of consumer internet companies, with returns from Tencent Holdings dominating its overall performance.
Although its net profit spiked after Prosus booked a one-time profit of $12.3 billion on the sale of part of its Tencent stake, operating losses at businesses it controls increased.
Prosus said in a statement on Monday that revenues at its e-commerce portfolio had risen by 53% to $4.2 billion, while that segment's trading loss increased to $372 million from a loss of $214 million in the same period a year ago.
The e-commerce portfolio, which does not include returns from its holding in Tencent, spans a group of businesses that Prosus either owns or controls in classified advertising, food delivery, educational technology and fintech and payments.
Prosus estimated the market value of the e-commerce businesses at around $49 billion.
It showed better profitability in its classifieds businesses, and strong growth at its food delivery businesses, which includes iFood in Brazil and Swiggy in India.
The figures were in line with indications the company had given in a Nov. 16 pre-announcement.
Bob Van Dijk, the Prosus CEO, said he did not expect China's recent moves to crack down on large technology firms to impact future earnings negatively.
"In spite of some regulation coming up ... Tencent is in my view the best-positioned internet company in the most attractive internet market in the world," he told reporters on a call.
In August, Prosus set up a cross-holding structure with Naspers, under which Prosus shareholders own 60% of their underlying assets but Naspers retains control. They share a single board.
In its separate earnings report, Naspers, South Africa's largest company by market capitalization, posted half-year revenue of $17.2 billion, up 29% from a year ago.
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Tencent Holdings Limited (TCEHY) Acquires Stake In Japanese Creative Studio For $44M
By: Benzinga | November 11, 2021
• Tencent Holdings Ltd (OTC: TCEHY) had tacitly acquired a 90% stake in Japanese creative studio Wake Up Interactive Ltd for over 5 billion yen ($44 million) in September, Bloomberg reports.
• The studio has several Nintendo Co Ltd (OTC: NTDOY) Nintendo Switch hit games.
• Wake Up owns Tokyo-based Soleil Ltd, which developed Nintendo Switch hit Ninjala and helped create Travis Strikes Again: No More Heroes. Soleil is known for producing high-quality action games for consoles, PCs, and smartphones.
• Tencent and NetEase Inc (NASDAQ: NTES) hired fresh talent in Japan over the past two years to acquire valuable intellectual property in anime and video games and decrease their revenue dependence on the domestic China market.
• In October, Kadokawa Corp (OTC: KDKWF) admitted Tencent plans to pay 30 billion yen for a 6.86% stake in the publishing company.
• The two Chinese game titans have also acquired or taken a stake in numerous smaller Japan-based game developers.
• Their focus has been on small studios and talented individuals contemplating leaving a more prominent company to set up their creative operation. In most cases, the deals are kept secret from the public over competitive grounds.
• Price Action: TCEHY shares traded lower by 0.29% at $61.66 in the premarket session on the last check Thursday.
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Nvidia, Tencent in Race for Next Spot in Trillion-Dollar Club
By: Bloomberg | October 30, 2021
The technology industry represents five of the six current members and may well be the spawning ground for the next. But there is competition. The commodity supercycle, the global push for clean energy and biotechnology developments could all produce candidates.
It’s an important issue. Membership of the club doesn’t just earn bragging rights for the likes of Elon Musk and Jeff Bezos, it also makes the companies hard to ignore for investors well beyond Wall Street. That could bring some welcome stability to shares such as Tesla, further boosting their attraction.
The most immediate competition is between Nvidia Corp. and Tencent Holdings Ltd. Chipmaker Nvidia is touted to as the big winner in the future of gaming and machine learning, thanks to its market-leading computer graphics card. Tencent, on the other hand, is a bet on China’s high-growth digital economy.
While both those stocks need to rise about 60% to make the club, it should be noted that Nvidia has risen more than 75% in four of the last five years. Tencent has been less successful.
“Regulation is an uncertainty, but China’s digital economy will continue to grow and Tencent will be part of it,” said Peter Garnry, head of equity strategy at Saxo Bank. He sees Nvidia, Tencent, PayPal Inc., ASML Holding NV and TSMC Ltd. as potential candidates in the next few years.
Tencent was at the cusp of hitting the milestone in January, but since then it’s been a downward slide for the WeChat owner due to Beijing’s crackdown on gaming and digital companies. Facebook Inc. saw a similar fate, with the social media giant losing its place in the club amid a slowdown in digital advertising and negative news about the platform.
ASML, which is the biggest equipment maker for the semiconductor industry, could spearhead Europe’s entry into the elite group in the next few years. The region’s drive for clean energy may spawn other candidates as the industry benefits from the push toward ESG investing.
“Cleantech will be massive as climate change and a cleaner world are stated political goals and the industry will solve some of the biggest problems this world is facing,” Garnry said.
Those signs are evident with Tesla’s rise this week.
“The overlay of important ESG/Climate related factors may also be a contributing influence where Tesla is seen by many as the ‘main event’ in renewables,” wrote Morgan Stanley analyst Adam Jonas.
For tech investor Ryan Jacob at Jacob Asset Management, the next trillion-dollar company could be a spin-off from the existing heavyweights. Though none of the tech elite have shown such intentions, he said YouTube spinning off from Alphabet Inc. and AWS being hived off from Amazon.com Inc. could well be the future trillion-dollar baby.
“Ebay did that with Paypal and PayPal went on to beat Ebay in size and growth,” Jacob said by phone.
Still, it may be a while before the market has another megaweight stock to celebrate. The possibility of higher interest rates in the U.S. as early as next year could damp demand for technology stocks as investors calculate that future earnings will be less valuable amid higher borrowing costs.
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Bear Of The Day: Tencent (TCEHY)
By: Zacks Investment Research | September 15, 2021
I am pitching Tencent (TCEHY), China's largest publicly trading enterprise out of China, as the bear of the day due to geopolitical risk. The significant and highly uncertain regulatory overhang coming out of Beijing has made Chinese tech an uninvestable class of public equities. Despite Tencent's unbelievably profitable growth acceleration that consistently impresses analysts quarter after quarter, the danger surrounding Xi Jinping's recent crackdown on tech has investors running for the hills.
The latest decree out of this increasingly authoritarian communist regime came from the National Press and Publication Administration restricting those under 18 years of age from playing online video games except for 3 predetermined hours per week, which sounds like something straight out of George Orwell's 1984. This business throttling ordinance almost looked to be a direct assault on TCEHY investors, with this gaming giant's operations being the most vulnerable to this new element of Beijing's autocratic control.
Analysts have been downwardly revising EPS estimates on TCEHY for the next few years as they price in the regulatory blows that Xi's increasingly autocratic regime will have on this digital powerhouse moving forward. Tencent has fallen to a Zacks Rank #5 (Strong Sell), and its stock is currently a falling knife that I would want to catch.
Bear Market For Chinese Tech
Hong Kong officially entered a bear market at the end of August as its innovation-powered Hang Seng Index experiences seemingly endless regulation catalyzed capitulation. Beijing has been busy releasing a flood of value-killing statutes that have brought Chinese tech stocks to their knees.
Minors will no longer be allowed to play their favorite video games from Monday thru Thursday and will only be permitted to game with their friends between 8 pm and 9 pm on Friday thru Sunday and public holidays (aka State determined holidays). According to Government officials, this move is an attempt to curb an apparent gaming epidemic amongst the country's youth to "effectively protect the physical and mental health of minors." In reality, the administration is likely just inhibiting the new normal of social interaction in a digitalizing world that the older generations fail to understand.
This ruling is nothing less than ruthless and is just one more element of control that the Party will now hold over its citizens in the world's second-largest economy. Minors will now be required to connect "anti-addiction" systems to their gaming devices. Game producers like Tencent will be prohibited from allowing individuals under 18 to play outside of the predetermined times. This punitive action should be a decision made by parents/guardians, not the State.
Tencent, the largest gaming company in China (over 50% market share), will be losing 10s of millions of daily users, but this didn't seem to shock investors. In early August, the digital gaming enterprise announced that it expected to see elevated regulation over the next couple of months. TCEHY is down 40% from its February highs, with the broader Hong Kong Exchange having lost 18% of its value over that same time frame. The endless flood of tech-focused controls can almost entirely explain both drop-offs.
Chinese legislators also recently approved one of the world's strictest data privacy laws, which would curb tech enterprises' ability to collect consumer data (a precious asset to these businesses). This was just another dagger to the already beaten-down tech sector in the region.
The new privacy laws will be put into place on November 1st and require businesses to collect minimum data, obtain consent for sensitive information, offer easy opt-out options, and direct government approval to transfer data overseas.
As I mentioned above, I wouldn't be trying to catch any of the falling knives in Chinese tech because we have no idea what Xi's end game is here. Whether it is to rid China of US investors, demonstrate to the private tech space who is really in charge, or maybe it is just Xi's administration attempting to match regulations used in countries abroad. The latter is doubtfully considering the 'convenient' timing of these various restrictions, but I still cling to the hope that Xi will eventually loosen his tyrannical grip.
How It Started & Where It Is Headed
Eccentric tech tycoon, Jack Ma, founder of Alibaba (BABA), seems to have catalyzed this endless flow of tech-focused regulation in China.
Xi's regime impeded Ma's fintech giant Ant Group's nearly half a trillion-dollar IPO last year. It wiped out more than $100 billion of its market value with a fresh regulatory overhaul aimed at Ant Group's unique micro-lending methods. This move by Chinese officials appeared to be in retaliation to Jack Ma's (founder and owner of the business) public criticism of the republic's financial system. Jack Ma's denouncement of China's economic practices seems to have triggered this fresh wave of tech regulation in the region. Xi fears that he could lose control of the masses to ostentatious billionaires like Ma.
Another 'timely' restriction came just 2 days after DiDi (DIDI), the Uber (UBER) of China, released its shares to US investors, the Cyberspace Administration in China announced a data-security review of the company that would require them to temporarily halt user growth. DIDI shares have since lost over $50 of their value. In fact, every publicly traded Chinese tech stock has taken a sizable dip since these restrictive announcements became a systemic issue earlier this year.
The progressing Chinese communist regime seemingly headed towards capitalism is now reeling back towards what looks like a government-controlled autocratic economy.
That being said, it is not unusual for the Chinese stock market to see these 20%+ stock market sell-off in any given year. In the past decade, the Hang Seng Index has experienced an over 15% market downturn in all but 2 of those years, entered a bear market (20%+ decline) in 4 of the last 6 years. The volatility that we are seeing in the Chinese market today is not unusual, but the mounting regulatory overhang causing this value deterioration is definitely unique to 2021. As I said, the unusual uncertainty here is what continues to compress Tencent and its cohorts' valuations.
Xi Jinping's rule is reversing decades of progress that China had been seemingly making towards a democratized international growth machine. I only hope that it doesn't turn into a full-on totalitarian nation.
Final Thoughts
There is nothing systemic about Tencent that I dislike. In fact, the business has a very healthy-looking balance sheet, accelerating profitable growth and rapidly expanding margins which appear attractive in the absence of the progressively authoritarian regime in Beijing. The geopolitical risk in the region is just too high for US investors today. The trade war between the US and China has me, and many other analysts concerned that Beijing is attempting to rid its GDP growth powering tech giants of US investors by making these companies uninvestable.
If Xi's administration shows signs of backing off its crackdown on tech, I won't hesitate to buy up shares of Tencent and the rest of Chinese tech, for that matter, but as of now, I am staying clear.
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China tells Alibaba, Tencent to open platforms up to each other - media
By: Reuters | September 11, 2021
SHANGHAI (Reuters) - China's industry ministry has told technology companies including Alibaba (NYSE:BABA) Group Ltd and Tencent Holdings (OTC:TCEHY) Ltd to stop blocking each other's website links from their platforms, the 21st Century Business Herald said Saturday.
The newspaper, citing unnamed sources, said the Ministry of Industry and Information Technology proposed standards to companies on Friday for instant messaging services, telling them all platforms must be unblocked by a certain time.
The ministry said it may have to resort to other measures if the firms did not comply, the newspaper said.
The move is the latest in a regulatory crackdown spanning industries from tech to entertainment and gaming companies.
Companies that attended the meeting included Alibaba, Tencent, ByteDance, Baidu Inc (NASDAQ:BIDU), Huawei Technologies Co and Xiaomi (OTC:XIACF) Corp, the newspaper said. The companies did not immediately respond to requests for comment.
China's internet is dominated by a handful of technology giants who have historically blocked links and services by rivals on their platforms, creating what analysts have described as "walled gardens".
Regulators in recent months have cracked down, accusing companies of building monopolies and restricting consumers' choices.
In July, the Wall Street Journal reported that Alibaba and Tencent were gradually considering opening up their services to each other, such as by introducing Tencent's WeChat Pay to Alibaba's Taobao and Tmall e-commerce marketplaces.
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Where Fundamentals Meet Technicals: TCEHY
By: Lyn Alden Schwartzer | September 1, 2021
This issue of “Where Fundamentals Meet Technicals” looks at two growth stocks and one commodity stock.
Tencent: Decision Time
Tencent (TCEHY) is a diversified corporation that operates China’s biggest social networks, one of the two main Chinese payment platforms, and a global gaming business. They hold stakes in companies like JD (JD) and Sea Ltd (SE), as well as many other companies around the world.
And like most Chinese companies, especially tech/media companies, their stock has been utterly destroyed by a major government crackdown on the industry, along with a downturn in China’s credit cycle. Sentiment on China is about as bad as it gets.
In terms of valuation, the stock bounced off the all-time low valuation level that it reached a few years ago when the Chinese government stopped approving its games for a year:
The F.A.S.T. Graph shows either 1) analysts are wrong about their earnings forecasts, or 2) the stock is undervalued:
Garrett’s chart shows a potential bottom in place, and writes, “breaking above the Aug high would be the first indication of a near-term trend change since the C-wave down started.”
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Tencent shares fall more than 2% after China tightens rules for young video gamers
By: Reuters | August 30, 2021
Shares of Tencent Holdings (OTC:TCEHY) Ltd dropped more than 2% on Tuesday, after China announced new rules for young video gamers.
That compared to a 0.4% slide in the benchmark Hang Seng Index and a 0.6% gain in Hang Seng Tech Index.
China announced on Monday rules forbidding under-18s from playing video games for more than three hours a week, a stringent social intervention that it said was needed to pull the plug on a growing addiction to what it once described as "spiritual opium".
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7 Cheap Chinese Stocks to Buy Now
By: MarketBeat | August 28, 2021
• Tencent Holdings (OTC: TCEHY) - Before buying Tencent Holdings, investors need to ask themselves which narrative they believe. Has the stock seen its best days now that it has declined by 25 percent since hitting its high in March? Or is that recent decline just a bump in the road for a stock that has nearly doubled in two years and, according to at least one portfolio manager, is a company that “is capable of growing 30% annually for a long period of time.”?
Tencent, the first Chinese company to have a valuation of over $500 billion, is largely unknown in the United States, but that seems about to change. This is largely due to Tencent’s WeChat social media platform that has the size of U.S. social media giants Facebook and Twitter (it went over 1 billion users in March), but has a broader scope that allows them to reach the consumer at many touch points, making the platform very appealing for advertisers. In addition to traditional social media, WeChat embraces mobile payments, streaming content, cloud-based computing, and recently online gaming. And that’s where the question may be answered. Although the government in Beijing has put a moratorium on approving new games (not just for Tencent, but for any provider), the size of the Chinese digital gaming community will make it impossible for that freeze to stay in place much longer.
Skeptics will point to Tencent’s valuation which, as measured by their P/E ratio, is 37 – not too far off their high of 40. There is also a growing sell sentiment regarding China stocks in general, and the liquidity of Tencent feeds into that. Still, if you’re looking for a stock that is capturing the minds, and wallets, of where the real growth is happening in China, it would seem Tencent’s best days are still to come.
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Tencent limits how long kids can play its flagship game, 'Honor of Kings'
By: Engadget | August 4, 2021
• Those aged under 18 can only play for one hour during weekdays.
China's regulatory war against its tech giants isn't limited to data. After opening a front in gaming back in 2018, the government is now adding to the restraints the biggest publishers face. Tencent is first on the chopping block. The publisher has been forced to further slash playing time on Honor of Kings for those aged under 18 to one hour during regular days and two hours on weekends. The rules, designed to appease the country's all-powerful censors, come into effect today, according to state media outlet the South China Morning Post.
Previously, play time in China was capped at 90 minutes per day during the week and three hours per day at weekends and holidays as part of broader rules introduced in 2019. Additional restrictions banned younger gamers from playing between 10 p.m. and 8 a.m. and curbed how much they could spend on downloadable content.
Honor of Kings is a hugely popular multiplayer online battle arena game developed by Tencent subsidiary TiMi Studio Group, also known for Call of Duty: Mobile and Pokémon Unite. As of November, the mobile title boasted 100 million players. But, its success has also brought with it increased scrutiny. In June, Tencent found itself at the center of a lawsuit that accused it of including "inappropriate" content in Honor of Kings, including characters with low-cut clothes and historical inaccuracies.
The latest crackdown comes amid growing fears in China over the addictive nature of video games. On Tuesday, a state-affiliated media outlet described the products produced by the gaming industry as “spiritual opium.” The article continued: “No industry or sport should develop at the price of destroying a generation.”
Therein lies the broader issue. China is currently grappling with a generational divide that has seen younger citizens reject the competitive lifestyle pressures heaped upon them. This stance is encapsulated by the "tang ping," or "lying flat," philosophy embraced by a growing number of Gen Z Chinese. In a nutshell, it signifies those who choose not to work hard, not to buy property and not to marry and have children.
Instead of addressing the societal complaints, China is choosing to deflect the blame onto the gaming industry.
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Cut in half.
Tencent vows fresh gaming curbs after 'spiritual opium' attack zaps $60 billion
By: Brenda Goh and Samuel Shen | August 3, 2021
SHANGHAI (Reuters) -China's Tencent Holdings (OTC:TCEHY) Ltd said on Tuesday it would further curb minors' access to its flagship video game, hours after its shares were battered by a state media article that described online games as "spiritual opium".
Economic Information Daily cited Tencent's "Honor of Kings" in an article in which it said minors were addicted to online games and called for more curbs on the industry. The outlet is affiliated with China's biggest state run news agency, Xinhua.
The broadside re-ignited investor fears about state intervention in China after Beijing had already targeted the property, education and technology sectors to curb cost pressures and reassert the primacy of socialism after years of runaway market growth.
"They don’t believe anything is off limit and will react, sometimes overreact, to anything on state media that fits the tech crackdown narrative,” Ether Yin, partner at Trivium, a Beijing-based consultancy.
China's largest social media and video game firm saw its stock tumble more than 10% in early trade, wiping almost $60 billion from its market capitalisation.
The stock was on track to fall the most in a decade before trimming losses after the article vanished from the outlet's website and WeChat account on Tuesday afternoon. The article later reappeared later in the day with the historically loaded term "spiritual opium" removed and other sections edited. The CSI300 index last week fell more than 5% for its biggest monthly loss since October 2018.
In the original article, the newspaper had singled out "Honor of Kings" as the most popular online game among students who, it said, played for up to eight hours a day.
"'Spiritual opium' has grown into an industry worth hundreds of billions," the newspaper said.
"....No industry, no sport, can be allowed to develop in a way that will destroy a generation."
Opium is a sensitive subject in China which ceded Hong Kong island to Britain "in perpetuity" in 1842 at the end of the First Opium War, fought over Britain's export of the drug to China where addiction became widespread.
Tencent in a statement said it will introduce more measures to reduce minors' time and money spent on games, starting with "Honor of Kings". It also called for an industry ban on gaming for children under 12 years old.
The company did not address the article in its statement, nor did it respond to a Reuters request for comment.
The article also hit rivals' shares. NetEase (NASDAQ:NTES) Inc dropped more than 15% before paring losses to sit around 8% lower in late afternoon trade. Game developer XD Inc fell 8.2% and mobile gaming company GMGE Technology Group Ltd dropped 15.6%.
Outside of gaming, investors were also caught off guard by the State Administration For Market Regulation (SAMR) on Tuesday saying it would investigate auto chip distributors and punish any hoarding, collusion and price-gouging. The semiconductor stock index subsequently fell more than 6%.
CHILD WELLBEING
The reposted Economic Information Daily article, in a shift of tone, said that authorities, game developers and families had to work together to combat child addiction to online video games, and parents had to be responsible for supervision.
Chinese regulators have since 2017 sought to limit the amount of time minors spend playing video games and companies including Tencent already have anti-addiction systems that they say cap young users' game time.
But authorities have in recent months placed fresh focus on protecting child wellbeing, and said they want to further strengthen rules around online gaming and education. Last month, they banned for-profit tutoring in core school subjects, attacking China's $120 billion private tutoring sector.
That added to other regulatory action in the technology industry, including a ban on Tencent from exclusive music copyright agreements and a fine for unfair market practices.
At one point on Tuesday, Tencent was briefly de-throned as Asia's most-valuable firm by market capitalisation by chipmaker Taiwan Semiconductor Manufacturing Co Ltd.
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Tencent Is World’s Worst Stock Bet With $170 Billion Wipeout
By: Bloomberg News | July 28, 2021
(Bloomberg) -- China’s unprecedented crackdown on its technology industry has turned Tencent Holdings Ltd. from a market darling into the world’s biggest stock loser this month.
The Chinese Internet giant had tumbled 23% in July as of Wednesday, set for its worst month ever after erasing about $170 billion of market value. That marks the fastest evaporation of shareholder wealth worldwide during this period, Bloomberg data shows. Nine of the top 10 losers in shareholder value this month are Chinese companies, including Meituan and Alibaba Group Holding Ltd.
Tencent’s shares rebounded by 7.1% on Thursday morning, tracking broader gains in Chinese stocks after Beijing intensified efforts to alleviate concerns about its crackdown on the private education industry.
The Shenzhen-based firm is one of the key casualties of an official campaign that targets some of the nation’s tech behemoths considered posing a potential threat to China’s data security and financial stability. The selloff in its shares intensified earlier this week after Beijing broadened the regulatory clampdown to include other once high-flying industries such as private education.
“I don’t see an end to the regulatory crackdown. Data security is a top priority to policy makers in the coming years. It’s a new normal,” said Paul Pong, managing director at Pegasus Fund Managers Ltd. “Valuations will have to be adjusted to cope with that, especially for technology giants like Tencent.”
The regulatory storm has resulted in penalties such as the loss of exclusive music streaming rights and anti-trust fines for Tencent. This week, the company said it was also suspending new user registration for its popular WeChat services and was ordered to fix mobile app-related issues.
Despite concerns about further punitive measures from regulators, the company’s stock is starting to look cheap and most analysts have refrained from cutting their price targets: Among the 68 analysts who have a rating on Tencent, 62 still recommend the stock as a “buy.” The average target price among analysts is HK$736.3, representing a 65% premium over Wednesday’s close of HK$447.2, Bloomberg data shows.
At HK$447.2, the stock was trading at 22.5 times forward earnings, well below its historical average of 30 times. It also has fallen to the most oversold level in more than six years.
“Tencent trading below HK$500 is attractive, but the upcoming earnings will be a key thing to watch,” said Pong, adding that if the firm can achieve 20%-30% growth, its shares could enjoy a solid rebound. “Because that would show they can still maintain good profitability in this tough environment.”
To Citigroup analysts including Alicia Yap, any substantial share buyback by the company could also help reverse currently poor investor mood.
“We believe if major Internet companies announce new share buyback programs or increase size of existing buybacks, it would demonstrate the management’s confidence in fundamentals and reassure investors on profit growth outlook,” Yap and her colleagues wrote in a research note. Yap has a ‘buy’ rating on the stock.
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China regulator bars Tencent from exclusive rights in online music
By: Reuters | July 24, 2021
SHANGHAI (Reuters) - China's market regulator on Saturday said it would bar Tencent Holdings (OTC:TCEHY) Ltd from exclusive music copyright agreements and fined the company for unfair market practices in the online music market after its acquisition of China Music Corporation.
The Chinese government has been stepping up antitrust actions in recent months against the country's large tech companies, including a record $2.75 billion fine on e-commerce giant Alibaba (NYSE:BABA) for engaging in anti-competitive behaviour.
Tencent and Tencent Music Entertainment Group (NYSE:TME), the unit created from the acquisition, said they would abide by the decision and comply with all regulatory requirements.
The State Administration Of Market Regulation (SAMR) said it had investigated Tencent's activities in the online music broadcasting platform market in China, in which music copyright is the core asset, in a notice posted on its official website.
Reuters reported in mid-July that the antitrust regulator would order Tencent's music streaming arm to give up exclusive rights to music labels that it has used to compete with smaller rivals, citing people with knowledge of the matter.
Tencent held more than 80% of exclusive music library resources after its acquisitions, the regulator said, increasing its leverage over upstream copyright parties and allowing it to restrict new entrants, the regulator said.
SAMR said Tencent and its affiliated companies must not engage in exclusive copyright agreements with upstream owners of such rights, while existing agreements must be terminated within 30 days of the regulatory notice.
The regulator also ordered Tencent to pay a fine of 500,000 yuan ($77,150).
Earlier this month, the regulator said it would block Tencent's plan to merge the country's top two videogame streaming sites, Huya (NYSE:HUYA) and DouYu , on antitrust grounds.
($1 = 6.4808 Chinese yuan renminbi)
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Tencent to buy British video game studio Sumo for $1.27 billion
By: Engadget | July 19, 2021
• The developer's output includes 'LittleBigPlanet 3' and its spinoff 'Sackboy.'
In a busy year for gaming mergers, another deal has just been announced. Tencent is to fully acquire Sumo Group, the UK developer behind LittleBigPlanet 3 and Crackdown 3. The Chinese web giant is offering 513 pence per share for the studio, in which it already owns an 8.75 percent stake, valuing it at $1.26 billion (£990 million).
The acquisition brings another major developer into the Tencent fold. Already the world's biggest gaming company, Tencent owns League of Legends studio Riot Games, and has a financial stake in several publishers including Epic Games, Activision Blizzard, Ubisoft, Bluehole, Paradox Interactive, Supercell, Grinding Gear Games and Yager, along with chat platform Discord. In February, the company acquired a minority position in DayZ developer Bohemia Interactive.
But, Tencent's dominance has triggered regulatory pushback at home and abroad. Earlier this month, Chinese authorities blocked its plan to merge its two game livestreaming sites, Douyu and Huya. Tencent is also negiotiating an agreement with a US national security panel that would allow it to retain its stakes in US companies Riot Games and Epic Games, according to multiple reports.
The Sumo acquisition hands Tencent a mix of AAA and indie content. Alongside LittleBigPlanet 3 and spinoff Sackboy, both published by Sony, Sumo was also behind Hitman 2. It also owns UK-based indie developer The Chinese Room (Everybody's Gone to the Rapture) and Red Kite Games, best known for ports of games like Two Point Hospital. In February, the studio purchased Poland's PixelAnt Games for £250,000.
“The business will benefit from Tencent’s broad videogaming ecosystem, proven industry expertise and its strategic resources, which will help secure and further the aspirations and long-term success of Sumo,” Ian Livingstone, non-executive chairman of Sumo, said in a statement.
Between Microsoft's acquisition of ZeniMax and EA's deal for Codemasters, 2021 is already turning out to be a blockbuster year for video game consolidation. Other hot deals include Epic Games acquisition of Fall Guys studio Mediatonic, Sony's purchase of Returnal developer Housmarque and Facebook's takeover of BigBox VR through its Oculus arm.
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Alibaba, Tencent mull over opening up services to each other - WSJ
By: Reuters | July 14, 2021
• July 14 (Reuters) - China's two online giants Alibaba Group Holding Ltd and Tencent Holdings Ltd are gradually considering opening up their services to each other, according to a Wall Street Journal report on Wednesday.
It comes days after China's crackdown on a number of technology companies with overseas listings including Didi Chuxing, Tencent and Alibaba.
Both Alibaba and Tencent are working on new plans separately to loosen up restrictions including introducing Tencent's WeChat Pay to Alibaba's e-commerce marketplaces, Taobao and Tmall, the WSJ report added, citing people familiar with the matter.
Alibaba did not immediately respond to a request for comment while Tencent could not be immediately reached. (Reporting by Tiyashi Datta in Bengaluru; Editing by Rashmi Aich)
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Chinese antitrust regulator blocks Tencent's $5.3 billion video games merger
By: Reuters | July 10, 2021
HONG KONG (Reuters) -China's market regulator on Saturday said it would block Tencent Holdings (OTC:TCEHY) Ltd's plan to merge the country's top two videogame streaming sites, Huya (NYSE:HUYA) and DouYu, on antitrust grounds.
Tencent first announced plans to merge Huya and DouYu last year in a tie-up designed to streamline its stakes in the firms, which were estimated by data firm MobTech to have an 80% slice of a market worth more than $3 billion and growing fast.
Tencent is Huya's biggest shareholder with 36.9% and also owns over a third of DouYu, with both firms listed in the United States, and worth a combined $5.3 billion in market value.
Reuters first reported the State Administration of Market Regulation (SAMR) plan to block the deal on Monday, which came after the regulator reviewed additional concessions proposed by Tencent for the merger.
SAMR said Huya and DouYu's combined market share in the video game live streaming industry would be over 70% and their merger would strengthen Tencent's dominance in this market, given Tencent already has over 40% market share in the online games operations segment.
Huya and DouYu are ranked No. 1 and No. 2, respectively, as China's most popular video game streaming sites, where users flock to watch e-sports tournaments and follow professional gamers.
Tencent said in a statement it "will abide by the decision, comply with all regulatory requirements, operate in accordance with applicable laws and regulations, and fulfill our social responsibilities."
The deal termination comes amid an ongoing crackdown on Chinese tech companies from the government. Earlier this year, the anti-monopoly regulator placed a record $2.75 billion fine on e-commerce giant Alibaba (NYSE:BABA) for engaging in anti-competitive behaviour.
DouYu said it "fully respects the regulatory decision and actively cooperates with regulatory requirements to operate in compliance with applicable laws and regulations."
Huya did not immediately respond to a request for comment.
In a memo from SAMR published concurrently with the announcement, Zhang Chenying, a member of the state council's anti-trust committee, argued the deal would prevent fair competition.
"If Huya and DouYu are to merge, the original joint control of Douyu will become Tencent's complete control of a merged entity," Zhang wrote.
"Considering factors such as revenue, active users, livestreaming resources and other key indices, we can expect that a merger would eliminate or restrict fair competition."
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Chinese activists sue Tencent over 'inappropriate' content in 'Honor of Kings'
By: Engadget | June 1, 2021
• A public interest group said the game, also known as 'Arena of Valor,' has elements that are unsuitable for kids.
Tencent has been sued over allegedly "inappropriate" content in the massively successful mobile game Honor of Kings. Beijing Teenagers Law Aid And Research Center claims the game, which is known as Arena of Valor in the West, includes content that isn't suitable for children.
The public interest group says it filed the lawsuit on Tuesday after an amended protection of minors law came into force. It contends that Tencent has lowered the recommended minimum age limit from 18 to 12 over the last few years.
The group claims Honor of Kings has characters with low-cut clothes, narrative elements that "tampered with historical figures" and "a lack of respect for traditional culture," according to Reuters. It also wrote in a social media post that the game's website and forums host "a lot of ... low-taste content that is inappropriate for teenagers" and that a raffle system could prompt young players to play the game for longer than they might otherwise.
Honor of Kings had 100 million daily active players worldwide as of November, Tencent said at the time. The company is the subject of other lawsuits, including one from TikTok owner ByteDance, which accused Tencent of violating antitrust laws by preventing users from accessing Douyin content on the WeChat and QQ messaging apps.
Reports in April suggested that China plans to fine Tencent amid an antitrust crackdown. The company may face a penalty of around $1.5 billion. Tencent has faced issues in some other areas. It lost publishing rights to PUBG Mobile Lite and PUBG Mobile Nordic Map in India last year after the country banned more than 100 apps with links to China.
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Tencent's Margins Are Going Down, and That's Great News for Shareholders
By: Motley Fool | May 23, 2021
• Tencent is investing more of its profits this year into big growth opportunities.
Shares of Chinese internet giant Tencent (OTC:TCEHY) traded down after it reported its first-quarter numbers last week. Although results were strong, with revenue up 25% and net profit up 22% by non-International Financial Reporting Standards, investors wary of China's recent anti-monopoly crackdown probably needed a bigger beat to assuage those fears.
In addition, Tencent's management forecast heavy stepped-up spending this year, which means the company's margins will edge down and profit growth will be somewhere between zero and that 22% seen last quarter, according to management.
However, instead of fearing this scenario for the highly profitable Tencent, shareholders should be celebrating the news.
New opportunities lead to more investment
Tencent has the world's largest video game empire, its 1.242 billion-user WeChat social media platform is the largest in China, and it's also the owner of the largest Chinese video and music streaming platforms. Tencent is also one of the two major digital-payment and cloud platforms in the country, neck-and-neck with Alibaba (NYSE: BABA). It's already so large, that some may think it may be hard to keep up top-line growth.
However, that view may be short-sighted. China's rising middle class creates a formidable tailwind, and Tencent's deliberate approach to monetization has allowed it to keep up consistent strong growth for a sustained period...
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Tencent's Timi will make new games with Xbox Game Studios
By: Engadget | May 13, 2021
• The partnership could produce a mobile spinoff of an Xbox franchise.
Two of the biggest names in gaming are joining forces. Tencent subsidiary Timi and Xbox Game Studios have struck a "strategic partnership" that will see them jointly create new games, the companies said in an announcement today. Details of the venture are sparse, but it wouldn't be surprising if it it involved a mobile spin on an Xbox franchise.
China's Timi — which reportedly became the world's largest developer last year — is known for its work on mobile games including the upcoming Pokémon Unite (which is also slated for the Nintendo Switch), Call of Duty: Mobile and its ports of multiplayer online battle arena titles Honor Of Kings and Arena Of Valor.
Microsoft's Xbox Game Studios, meanwhile, owns a war chest of popular game series through its enviable roster of subsidiaries. Its recent $7.5 billion acquisition of Bethesda parent ZeniMax brought the total number of first-party studios under its umbrella to 23. While its eye-watering output includes franchises such as Halo, Minecraft, Fallout, Forza, and Wolfenstein, to name a few. So, the East-meets-West combination should be an exciting prospect for gamers worldwide.
Tencent is no stranger to foreign partnerships, either. The company's deal to distribute the Nintendo Switch in its native China has proven lucrative for both parties, with the console outselling the PS4 and Xbox One. Microsoft will be hoping the Timi partnership can help it to replicate some of that success.
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China’s Tencent in Talks with U.S. to Keep Gaming Investments
By: Echo Wang and Greg Roumeliotis | May 6, 2021
• (Reuters) – Tencent Holdings Ltd is negotiating agreements with a U.S. national security panel that would allow it to keep its ownership stakes in U.S. video game developers Riot Games and Epic Games, according to people familiar with the matter.
Tencent has been in talks with the Committee on Foreign Investment in the United States (CFIUS), which has the authority to order the Chinese technology giant to divest U.S. holdings, since the second half of last year, the sources said.
CFIUS has been looking in to whether Epic Games’ and Riot Games’ handling of the personal data of their users constitutes a national security risk because of their Chinese ownership, the sources added.
Tencent owns a 40% stake in Epic Games, the maker of popular video game Fortnite. Tencent also bought a majority stake in Riot Games in 2011 and acquired the rest of the company in 2015. Riot Games is the developer of “League of Legends,” one of the world’s most popular desktop-based games.
Tencent is negotiating risk-mitigation measures with CFIUS so it can keep its investments, according to the sources. The details of the proposed measures could not be learned. They typically involve ringfencing the owner of a company from operations that have national security implications. They often call for the appointment of independent auditors to monitor the implementation of these agreements.
One of the sources said Epic Games has not been sharing any user data with Tencent.
The sources cautioned there is no certainty that Tencent will clinch deals to keep its investments and asked not to be identified because the matter is confidential.
Tencent, Epic Games and a CFIUS representative at the U.S. Treasury Department declined to comment.
A Riot Games spokesman said the Los Angeles-based company operates independently of Tencent and that it has implemented “industry-leading practices” to protect player data. He declined to comment on Riot Games’ discussions with CFIUS.
CFIUS has been cracking down on Chinese ownership of U.S. technology assets in the last few years, amid an escalation in tensions between Washington and Beijing over trade, human rights and the protection of intellectual property. U.S. officials have expressed concerns that the personal data of U.S. citizens could end up in the hands of China’s Communist Party government.
President Joe Biden’s administration has maintained the hawkish stance against China inherited in January from his predecessor Donald Trump, albeit with more of a focus on geopolitical issues such as the future of Taiwan and Hong Kong, as well as China’s persecution of the Uyghurs in Xinjiang.
Yet many key CFIUS roles have not yet been staffed. This has provided a reprieve to China’s ByteDance, which was ordered by Trump last year to sell its popular short video app TikTok but balked at a transaction that would have involved Oracle Corp and Walmart Inc. CFIUS has not sought to enforce the divestiture order under Biden.
Epic is locked in a legal fight with Apple Inc over access to the iPhone maker’s app store. It alleges that Apple forces developers to use its in-app payment systems – which charge commissions of up to 30% – and to submit to app-review guidelines that discriminate against products that compete with Apple’s own.
Apple argues that Epic Games broke their contract when it introduced its own in-app payment system in Fortnite to circumvent Apple’s commissions. It says the way it runs the app store inspires trust in consumers to open up their wallets to unknown developers.
Tencent’s vast businesses include video games, content streaming, social media, advertising and cloud services. China has in recent months sought to curb the economic and social power of Tencent and other internet companies such as Alibaba Group Holding Ltd, in a clampdown backed by President Xi Jinping. Reuters reported last week that Beijing was preparing a substantial antitrust fine for Tencent.
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Tencent (TCEHY) Upgraded by Zacks Investment Research to Buy
By: MarketBeat | April 13, 2021
• Tencent (OTCMKTS:TCEHY) was upgraded by Zacks Investment Research from a "hold" rating to a "buy" rating in a research note issued to investors on Tuesday, Zacks.com reports. The firm currently has a $89.00 price objective on the technology company's stock. Zacks Investment Research's price objective indicates a potential upside of 12.30% from the stock's current price.
According to Zacks, "Tencent Holdings Limited is an Internet service portal. Tencent provides value-added Internet, mobile and telecom services and online advertising. Tencent's leading Internet platforms in China are QQ Instant Messenger, QQ.com, QQ Games, Qzone, 3g.QQ.com, SoSo, PaiPai and Tenpay. It has brought together China's largest Internet community, to meet the various needs of Internet users including communication, information, entertainment, e-commerce and others. Tencent Holdings Limited is headquartered in Shenzhen, the People's Republic of China. "
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Tencent Slips After Prosus Reveals Plan To Cut 2% Stake
By: Dhirendra Tripathi | April 7, 2021
Investing.com – Shares of Tencent Holdings (OTC:TCEHY) slumped in Wednesday’s premarket following a disclosure by Prosus (OTC:PROSF) that it will cut its stake in the Chinese tech giant to 28.9% from 30.9%.
Based on Tencent's closing price on Wednesday, the share sale would have been worth $15.53 billion but given the near 9% fall today, the eventual proceeds could clearly be less.
The Dutch conglomerate, a subsidiary of South Africa's Naspers, said it intends to sell up to 191.9 million shares in Tencent to global institutional investors. Naspers was one of the earliest investors in Tencent.
“The proceeds of the sale will increase our financial flexibility, enabling us to invest in the significant growth potential we see across the group, as well as in our own stock,” CEO Bob van Dijk said in a statement.
Prosus said it was committed to not reducing its stake further for three years.
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Alibaba, Tencent, Baidu Down as Much as 3% in Premarket After China Fines
By: Dhirendra Tripathi | March 12, 2021
Investing.com – The ADRs of some of China's biggest companies were hit on Friday by a fine in their home country, pushing them down by as much as 3% in premarket trading.
Overnight, the Chinese markets regulator penalized 12 companies for violating anti-monopoly rules, in what was interpreted by some as a shot across the bows of companies whose financial clout is reportedly seen as a threat by some in Beijing.
Those getting the stick include Alibaba Group (NYSE:BABA), Baidu (NASDAQ:BIDU), Tencent (OTC:TCEHY), ride-hailing company Didi Chuxing and a ByteDance-backed firm. Alibaba Group ADRs were down 2.4%, Baidu 2.7% and Tencent Music down 3.0%. Tencent Holdings' stock in Hong Kong had finished down 4.4% but was yet to trade in premarket.
Quoting the State Administration for Market Regulation (SAMR), Reuters said the companies were fined 500,000 yuan ($77,000) each for behavior that caused market concentration but did not exclude all competition from other companies.
The fines were small, relative to the size of the companies involved. As such, markets were spooked more by the signal that Beijing was sending. The move comes only a couple of months after regulators wrecked plans for Jack Ma's Ant Group to go public with fresh regulations that cracked down on some of its most lucrative financial services.
Tencent said in a statement it would actively rectify operations and provide the regulator with timely reports on deals in future.
China has stepped up scrutiny of its internet giants in recent months, citing concerns over monopolistic behaviour and potential infringement of consumer rights.
The regulator has fined Alibaba (NYSE:BABA), Tencent-backed China Literature and other firms for not reporting deals properly for anti-trust reviews.
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Tencent boss to call for tighter governance on China's internet economy: state media
By: Reuters | March 3, 2021
The founder and CEO of technology giant Tencent Holdings (OTC:TCEHY) plans to call for tighter governance of the internet economy at China's parliamentary meeting in Beijing, state broadcaster China National Radio (CNR) said on Wednesday.
Pony Ma will make the proposal at the National People's Congress (NPC), which starts on Friday, the report said. Hundreds of proposals are likely to be submitted at the annual gathering, though most are suggestions by individual delegates and are not discussed in parliament.
"It is recommended to carry out government guidance and development in specific areas such as online education, online healthcare and financial technology," CNR cited Ma's proposal as saying. Those are all areas in which Tencent is involved, though the report did not name specific businesses.
The proposal comes amid tighter scrutiny of China's tech giants, with regulators having drafted anti-monopoly rules and guidelines in recent months to limit collection of personal data by mobile apps.
Peer-to-peer payment platforms, as well as long-term property rental, bike-sharing and community group-buying platforms must pay close attention to the security of users' funds and be strictly monitored, CNR cited the proposal as saying.
China's market regulator on Wednesday fined five community group-buying platforms, including one company backed by Tencent, for what the watchdog said was "improper pricing behaviour".
Tencent, operator of China's ubiquitous messenging service WeChat, said that Ma, an NPC delegate from Guangdong province, would submit the proposal in a personal capacity and not on behalf of the company.
Thousands of delegates will gather in Beijing for the meeting of parliament, at which China will announce goals for 2021 as well as its next five-year plan for economic development.
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'Brawl Stars' unable to fight off sales decline for Tencent's Supercell
By: Reuters | February 16, 2021
HELSINKI (Reuters) - Finland's biggest video game maker Supercell reported a 7% drop in annual sales on Tuesday, squeezed by intense competition even as the COVID-19 pandemic pushed people indoors and boosted the broader gaming sector.
Supercell, majority owned by China's Tencent Holdings (OTC:TCEHY) and known for titles such as "Clash of Clans", said that "Brawl Stars", published in 2017 and the newest of its existing games, crossed the 1 billion euro mark in gross revenue early this year.
The company said overall user numbers rose year on year but increased marketing costs and the way Supercell books sales and expenses separately meant the benefit was not reflected in the annual financial statement.
"Well over a half of marketing costs come from investing in the gamer community," Chief Executive Officer Ilkka Paananen said in a statement.
The company did not disclose the extent of its marketing spending.
Global video game revenue is estimated to have surged 20% to $179.7 billion in 2020, according https://www.marketwatch.com/story/videogames-are-a-bigger-industry-than-sports-and-movies-combined-thanks-to-the-pandemic-11608654990 to IDC data, making the sector a bigger moneymaker than the global movie industry.
Supercell and rival mobile game maker Rovio, of "Angry Birds" fame, have struggled to generate revenue growth in the face of increasing competition from console games.
Supercell's games are free to download and the company makes its money from in-game purchases
Last year's annual revenue fell to 1.3 billion euros, down from almost 1.4 billion euros the previous year, while earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped 21% to 407 million euros.
In the past two years Supercell has released and discontinued two games and now has five actively supported games.
($1 = 0.8232 euros)
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Tencent hit with fresh anti-monolopy complaint, this time from GM China venture
By: Reuters | February 8, 2021
Chinese tech giant Tencent Holdings Ltd has become the target of a fresh anti-monopoly complaint to regulators, this time from a supplier of smart vehicle technology and a General Motors Co China venture.
The supplier, Shanghai PATEO, in a statement accused Tencent of abusing its messaging app's dominant market position to restrict sales of its products.
PATEO offers voice recognition features and other mobile applications that rely on Tencent's all-in-one WeChat app. It added that Tencent has been asking car companies to stop using PATEO's Internet of Vehicles products since August 2020.
Tencent did not immediately respond to a request for comment. The GM venture with SAIC Motor Corp, which jointly submitted the request with PATEO, also did not immediately reply to a request for comment.
The new complaint comes just a week after ByteDance's Chinese version of TikTok called Douyin accused Tencent of monopolistic behaviour and filed suit in a Beijing court, seeking 90 million yuan ($14 million) in compensation.
Tencent has described that claim has false and said ByteDance was illegally using its users' data.
Chinese regulators have stepped up anti-trust scrutiny of tech firms since December, launching a probe into e-commerce giant Alibaba Group Holding Ltd and penalising Alibaba-backed and Tencent-backed firms for not seeking anti-trust reviews for deals.
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