China's Tech Crackdown Turns Toward Tencent-Backed Douyu, Huya Merger

China’s market regulators have initiated an investigation into the merger of Tencent Holdings ADR (OTC: TCEHY)-backed live streaming platform Douyu International Holdings Ltd (NASDAQ: DOYU) and video game publisher and live streamer Huya Inc ADR (NYSE: HUYA), Reuters reports.

What Happened: The Huya-Douyu merger deal announced in October, an all-stock deal, was initiated after Tencent had pushed both companies into re-organization. The deal also received written consent from Joyy Inc (NASDAQ: YY), one of Huya’s shareholders with a significant stake.

For each ADS held in Douyu, Huya agreed to pay 0.730 ADS (equal to 1 Huya Class A stock) in consideration.

The details about the latest investigation are still unclear. 

Why Does It Matter: Off-late, the Chinese authorities are probing into the workings of its tech companies and adherence to regulatory disclosures, reports China Daily.

Reportedly, Tencent was recently fined approximately RMB 500,000 (roughly $76,000) for its deal with the Chinese entertainment company, New Classics Media. Alibaba Group Holdings Ltd (NYSE: BABA) was also fined a similar amount this week over its Intime Retail (Group) Co Ltd deal.

Price Action: In the pre-market session on the last check Monday, DOYU was trading lower by 3.5% at $11.30, HUYA is down 1.33% at $20.08.