HONG KONG (BLOOMBERG) - Tencent Holdings plans to distribute more than US$16 billion (S$22 billion) of JD.com shares to its investors as a one-time dividend, representing a near retreat from the Chinese e-commerce firm that has been one of its most successful investments.
It plans to give out 457.3 million Class A shares in JD.com, representing about 86.4 per cent of its total stake and nearly 15 per cent of the online retailer's total issued shares, according to a filing to the Hong Kong stock exchange. At Wednesday's (Dec 22) close, the shares in the proposed distribution was worth HK$127.7 billion.
Tencent, which controls about 17 per cent of JD.com, will hold roughly 2.3 per cent of the e-commerce company's shares after the handout, JD.com said in a separate statement.
The special dividend would rank among the largest shareholder giveaways ever by a Chinese tech company, which have long relied on rapid growth and investment to satisfy investors.
"The dividend payout plan is rare," said Mr Gary Ching, vice-president of research at Guosen Securities (HK). "It is a way for Tencent to sell JD shares, which will reduce the selling pressure for JD, but it's obviously bad news for both companies at this time."
The core of the country's current anti-monopoly crackdown is to scale back the giants' involvement in various industries, Mr Ching added. Other companies such as Alibaba may also have to withdraw their previous investments in some successful start-up companies, he said.
Tencent's strategy is to invest in companies during their development stage and to exit the investments as they become capable of financing future initiatives on their own, the Internet giant said.
"The Board believes that JD.com has now reached such a status, and the Board therefore considers that it is an appropriate time to transfer" the majority of the shares to its investors, the company said.
The proposed dividend comes after Chinese tech shares have been battered by more than a year of intense regulatory scrutiny. The crackdown, which has spanned areas from antitrust to after-school education, gaming and online content, has slowed growth at Internet firms from Tencent to investee Meituan and fierce rival Alibaba Group Holding, forcing the companies to invest heavily in new earnings drivers.
President Xi Jinping's call to achieve "common prosperity" and level income inequality has also prompted the firms and the moguls behind them to make public pledges to philanthropic efforts.
Tencent has already announced it is setting aside US$15.7 billion for social responsibility programmes. Tencent president Martin Lau will resign as director of JD.com as of Thursday. The two firms will continue to maintain their "mutually beneficial business relationship, including via their ongoing strategic partnership", Tencent said.
Having Tencent as its major shareholder gave JD.com access to the Internet giant's vast ecosystem, including the super app WeChat that the majority of Chinese consumers use for messaging, paying bills and making purchases. Competitors such as Alibaba have long complained that links to their services have been blocked, though that is slowly changing under Beijing's pledge to drive out anticompetitive behavior in the Internet arena.
