Tencent Sells $3 Billion in Shares of Singapore’s Sea

(Bloomberg) -- Tencent Holdings Ltd. cut its stake in Singapore's Sea Ltd. by selling $3 billion in shares, sparking a rout in the Southeast Asian gaming and e-commerce company.

The deal will likely inflame speculation Tencent is planning to pare its holdings in some of China's biggest tech names from Meituan to Kuaishou Technology, as it pivots toward overseas growth and new areas such as the metaverse. China's social media and gaming leader controlled a portfolio of investments worth $185 billion at the end of September, Bloomberg Intelligence estimates.

The share sale comes less than a month after Tencent said it would hand out more than $16 billion of JD.com Inc. stock as a one-time dividend, an effort to divest most of its stake in China's No. 2 online retailer. The surprise move was seen as being in response to Beijing's push to curb anticompetitive behavior and open up closed ecosystems.

Read more: China Tech Selloff Deepens as Tencent Sale Spooks Traders

What Bloomberg Intelligence Says

China's anti-monopoly rules and regulators' concerns about data privacy as well as Web security may lead to more divestment in the country's internet space in the coming months. Potential changes in ownership may cause short-term operational disruption, but JD.com and Weibo's market position as well as strong financial profile may buffer them against ratings-related risks. 

- Cecilia Chan, analyst

Click here for the research.

Read more: Alibaba Said to Mull Options for Weibo Stake With State Firm

Sea's New York-listed depositary receipts fell 11.4% on Tuesday. Tencent sold the shares at $208 apiece, a discount of 6.9% to the previous close, according to term sheets distributed by banks arranging the sale. In a subsequent U.S. exchange filing, Tencent said it sold the shares at a net $207, without elaborating.

Tencent is reducing its holding in Sea to 18.7%, it said in a statement, maintaining a sizeable stake in Southeast Asia's most valuable tech company. Sea, which in November raised its e-commerce outlook for a second time in 2021, has enjoyed a post-pandemic surge in gaming and online retail worldwide.

The divestment will provide the Shenzhen-based company with “resources to fund other investments and social initiatives, while retaining a substantial majority of its stake in Sea and continuing to benefit from the company's future growth,” it said.

Tencent has agreed not to sell further Sea shares for the next six months, according to terms of the deal obtained by Bloomberg News. 

Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley arranged the sale.

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