Why China's JD Is Giving Rival Tech Giant Tencent An Additional $220M Stake

Chinese e-commerce giant JD.Com Inc JD on Wednesday said that it renewed its strategic cooperation agreement with the tech and gaming giant Tencent Holdings TCEHY for a period of three years.

What Happened: The company, in a press statement, said it would issue shares worth $220 million to Tencent over a three-year period to access certain services on the latter's social media platform WeChat.

"Tencent will continue to offer the Company prominent Level I and Level II access points on its Weixin platform to provide traffic support, and the two parties also intend to continue to cooperate in a number of areas, including communications, technology services, marketing, and advertising, and membership services, among others," JD said in a statement.

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"The two parties will leverage this mutually beneficial partnership to provide a better and more convenient shopping experience for users," it added.

According to a regulatory filing, Tencent currently owns 2.7% of outstanding Class A shares of JD.com as of March 25. The deal will further extend its existing partnership with the WeChat owner.

Tencent first invested in JD.com in 2014, and last year the company sold its $16.4 billion stakes in JD to Walmart Inc WMT.

Price Action: The Hong Kong-listed stock of JD gained 1.19% during the trading session on Thursday, while Tencent cracked about 1.64%. According to data from Benzinga Pro, JD shares closed 0.48% higher in the U.S. on Wednesday, while OTC shares of Tencent gained 1.64%.

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Photo via Sergei Elagin on Shutterstock