26 February 2020
News of chairman Pony Ma selling nearly HK$2 billion worth of stock on the market is fueling anxiety among Tencent’s shareholders. Photo: Bloomberg
News of chairman Pony Ma selling nearly HK$2 billion worth of stock on the market is fueling anxiety among Tencent’s shareholders. Photo: Bloomberg

Is it time to sell your Tencent shares?

You don’t become a tycoon in China if you don’t know how to sell your shares high and buy them low.

So, how do we take the news of Tencent’s chairman Pony Ma Huateng selling nearly HK$2 billion worth of shares in the Chinese social media and gaming giant? Should we interpret the sale as a sign that that the stock has perhaps hit a peak for now after a bumpy ride in the past two years? 

According to a stock-exchange filing, Ma has offloaded five million shares of Tencent over four days last week at prices ranging from HK$398 to HK$401.

The disposal marked the tycoon’s first such sale since October 2017, when he cashed in about HK$2.1 billion worth of his personal holdings, and comes as shares of the internet giant rebounded to a 21-month high.

The largest Hong Kong-listed company by market capitalization – Tencent was worth HK$3.78 trillion as of close on Monday, making it more valuable than China Mobile, HSBC and AIA combined – Tencent became a market underperformer in 2018 after its largest shareholder, Naspers, sold some shares in the Chinese firm for the first time.

The South Africa-based internet and media company reaped more than US$10 billion in March 2018 by trimming — by 2 percent — the Tencent stake it had held since 2001, reducing its holding to roughly 31 percent.

The sale, at HK$405 per share, meant about 5,600 times return on capital for the African tech group, making it one of the world’s most successful stock investments.

A senior Tencent executive, meanwhile, also sold some shares, after which the stock fell to below HK$260 in the subsequent six months and seemed to lose momentum.

In the latest deal, Chairman Ma, via his wholly-owned Ma Huateng Global Foundation, cashed out at a price close to the Naspers’ deal.

The transaction, not surprisingly, is fueling chatter in the market that Tencent may have peaked for now, and that the valuation may be a bit high in the wake of the global market rally.

Ma still owns 8.53 percent of Tencent, which ended yesterday at HK$396, and his stake is worth around HK$323 billion.

We can only wait and watch how Tencent’s share price moves in the coming weeks and months following the founder’s share sale.

While investors have reason to fret, they should, however, bear in mind the fact that Ma’s disposal timing has not always been perfect.

In 2007, for example, he sold some shares for as low as HK$40.

In his previous disposal in October 2017, Ma dumped Tencent at around HK$350, but the shares went up 10 percent within one month.

Still, this time it might be different, given the fact that Ma’s top lieutenant, Martin Lau, has also cashed out more than HK$190 million by selling 500,000 shares at around HK$384 on average this month.

Lau’s last disposal in March 2018 was done right after Naspers’ disposal and the stock went through a long drought in subsequent months.

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EJ Insight writer