Chinese internet giant Tencent Holdings (00700.HK), which had pledged to accelerate the development of its “mini-programs”, or mini mobile applications that are built into the WeChat platform, has led an investment in China Youzan (08083.HK), an entity that specializes in helping corporate clients develop such tools.
According to a regulatory filing from Yuozan on Wednesday, a group of investors subscribed about 1.7 billion new shares of the company at a price of HK$0.53 per unit, generating roughly HK$900 million for the Hong Kong-listed firm.
Subscribers include Poyang Lake Investment, an equity investment firm wholly owned by Tencent.
The Tencent unit took up over 1 billion new shares for HK$549 million, as per the filing. That will give it a 6.7 percent stake in Youzan.
Founded in 2012, Youzan offers merchants suites of solutions comprising third-party payments and software-as-a-service (SaaS) products through an online platform, providing things such as marketing and customer engagement tools to facilitate the process of transactions between merchants and their customers.
Youzan has put offline merchants and retailers as its target clients since 2017 by engaging third-party application developers through its platform. The company helps brick-and-mortar stores to customize sales and marketing solutions such as mini-programs to engage with the customers.
Tencent’s tie-up with Youzan is expected to enhance the retail application for its WeChat ‘mini-program’ initiative, complementing with Youzan’s experience of serving retail businesses.
The Shenzhen-based tech giant plans to expand the mini-program initiative to unlock new business opportunities, which cover various activities, including gaming, ride-hailing, online shopping, food delivery, government services, and many more.
Tencent founder and chief executive Pony Ma previously said in a speech that he believes mini-programs are paving a path for his company to expand into the “internet of enterprise”.
According to Youzan, 60 percent of the share subscription proceeds will be used toward promotion of advertising services, while 31 percent will be used for the firm’s marketing services.
The subscription price of HK$0.53 per share represents a discount of 17 percent over Youzan’s closing price on Tuesday. Youzan shares jumped as much as 23 percent to HK$0.79 in early trading on Wednesday following news of the Tencent investment, before paring the gains.
Mega Prime Development, GCYZ Holdings, and Franchise Fund, are among others that participated in the subscription of new Youzan shares.
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