Less than a day after Snap Inc. posted weak results that sent its shares plunging, the struggling social-media and camera company disclosed that Chinese internet giant Tencent Holdings Ltd. had recently bought a 12 percent stake, becoming one of its largest shareholders, the Wall Street Journal reports.
Tencent, an early pre-IPO backer of Snap, acquired roughly 146 million of its shares in the public market, Snap said in a filing Wednesday. The purchase adds to an investment Tencent made in Snap in 2013 during a fundraising round before the company’s initial public offering of stock. Tencent’s current total position in Snap wasn’t clear.
Tencent didn’t disclose the price it paid for the shares, but as recently as Oct. 6 executives were discussing raising its stake through share purchases on the open market, a person familiar with the matter said. That would suggest Tencent likely spent at least US$2 billion acquiring the stake, based on Snap’s minimum share price in this period.
The disclosure comes one day after Snap’s quarterly results fell short of Wall Street’s expectations. The company failed to significantly add to the number of people using its app on a daily basis. The amount of money advertisers are spending on Snapchat to reach those users also disappointed investors.
Tencent’s purchase did little to cushion investors’ disappointment over Snap’s performance. The Los Angeles company’s shares fell more than 15% in Wednesday morning trading, after several analysts cut their price targets for the stock, which was recently trading 24 percent below its IPO price.
“We have long been inspired by the creativity and entrepreneurial spirit of Tencent,” Snap said in a filing, “and we are grateful to continue our longstanding and productive relationship that began over four years ago.”
Snap quoted Tencent president Martin Lau as saying his company “is excited to deepen its shareholding relationship with us, and that it looks forward to sharing ideas and experiences.”
Tencent executives began discussing raising the company’s stake in Snap in September, after Snap’s shares touched a series of fresh lows in August, the person familiar with the matter said. Tencent wanted to support its investment in the US company during its weakened state, the person said.
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