Tencent’s biggest shareholder will cut its stake in the social media and gaming giant, just over a year after promising not to sell the stock for three years.
Prosus, a spin-off of South African media and internet investment firm Naspers, announced on Monday that it would reduce its huge stake in Tencent to fund a share buyback program.
Shares of Tencent (TME) fell more than 4% Tuesday in Hong Kong after the news. On Monday, shares of Prosus (PROSY) and Naspers (NAPRF) rose 16% and 23% in Amsterdam and Johannesburg, respectively.
Amsterdam-based Prosus is Tencent’s largest shareholder with a 28.8% stake worth c. $128 billion.
This is not the first time Prosus has sold shares of Tencent in recent years. Last April, Prosus sold a 2% stake in Tencent for $14.7 billion, the biggest block deal ever at the time. (Block trades are usually arranged directly between large institutional investors rather than on public exchanges.)
Prosus then pledged not to sell any more Tencent shares for at least the next three years.
Since then, Tencent stock has plunged 40%, hammered by Chinese tech repression and a weakening economy. This crash erased $295 billion from its market capitalization.
Prosus said on Monday it would use the proceeds from the sale of open-ended shares to buy back its own shares and those of Naspers.
“It will also rebalance our asset base towards our fast-growing non-Tencent assets,” Bob van Dijk, CEO of Prosus and Naspers, said in the statement.
The company said it would start selling a small number of Tencent shares “regularly and in an orderly fashion”, but did not specify how many.
Tencent said on Monday that the sale of Prosus would represent only a small percentage of the average daily trading volume of its shares, according to an exchange filing.