Tencent move to sell $3bn of Sea shares sends stock down sharply

Shares in Sea fell more than 11 per cent on Tuesday after Chinese internet group Tencent said it would sell more than $3bn of its stock in the New York-listed Singaporean gaming and ecommerce group.

China’s most valuable publicly listed tech company said that once the transaction is completed, its equity interest in Sea will fall from 21.3 per cent to 18.7 per cent. Sea’s Nasdaq-listed shares closed 11.41 per cent down at $197.84 on Tuesday.

Tencent’s announcement came less than a month after the company sold down its stake in JD.com, the Chinese ecommerce business.

The group said it would retain the “substantial majority” of its equity in Sea “for the long term” and would not sell any more shares for the next six months. It gave no reason for the sale but said the proceeds would “fund other investments and social initiatives”.

Tencent said last month it would distribute $16bn of shares in JD.com to shareholders, cutting its stake from about 17 per cent to 2.3 per cent.

A person close to Tencent said at the time of the divestment that regulators had not asked the company to sell down its investments, which are collectively worth some $259bn according to analysts at Bernstein, but Tencent was keen to show it was not “empire building”.

Tencent did not want “to be seen to be exerting massive influence over a huge segment of the economy in perpetuity”, the person added.

As well as selling down its stake in Sea, Tencent also said it would convert its class B shares, which currently carry three votes each, into class A shares at the Singapore company’s annual meeting in February. After the conversion, Forrest Li, Sea’s chief executive, will hold all class B shares and Tencent’s voting power in the company will fall to less than 10 per cent.

Tencent has been a big investor in Chinese technology companies, but over the past year the group has also rapidly expanded its overseas investments.