Investors Prune Stake In This Major Chinese Gaming Company After Alibaba

South African internet firm Naspers Ltd NPSN and its Prosus NV PROSY unit look to trim down their stake in Tencent Holding Ltd TCEHY to fund a share buyback.

Naspers reported FY22 revenue growth of 24% year-on-year to $36.7 billion. Ecommerce revenue grew 49% Y/Y to $10.7 billion.

Core Headline Earnings declined 16% Y/Y to $2.1 billion, reflecting a lower contribution from Tencent after selling 2% of its holdings in Tencent.

Also Read: Inspired By Alibaba, Tencent Goes Global As Regulatory Crackdown In China Continues To Bite

Naspers broached the buyback program the same day as they revealed the sale of almost $3.7 billion of stock in e-commerce giant JD.com Inc. that they got from Tencent as a special dividend.

Naspers aims to manage the sale of Tencent stock in an orderly fashion, adding that any shares sold would comprise a fraction of the Chinese firm's average trading volume, Bloomberg reports.

Naspers and Prosus were concerned over their stake in Tencent exceeding their businesses.

"We look to rebalance our asset base towards our fast-growing non-Tencent assets, whose value we expect to increase over time while retaining exposure to Tencent's significant value creation potential," CEO Bob van Dijk said.

Tencent supported the decision and saw a minimal impact from the selloff.

The stake sales revive concerns around the long-term prospects of holding shares in Chinese internet firms. The move could also dilute reassurances from China's top economic official over ease in the crackdown.

JP Morgan Chase & Co JPM recently reversed its bearish stance on the Chinese tech industry by terming the selloff as a buying opportunity due to ease in lockdowns, continued growth support measures, and possible relaxation in the regulatory crackdown.

Recently, Softbank Group Corp SFTBY had sold a substantial stake in Alibaba Group Holding Limited BABA to maintain investing in startups and share repurchases.