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$TCEHY announced that they are giving shareholders their ~18% stake in $JD as a special dividend, which is a 3% yield. Shareholders receive one JD share for every 21 Tencent shares they own.
Here’s why this is even better than it might seem at first glance…
$TCEHY announced that they are giving shareholders their ~18% stake in $JD as a special dividend, which is a 3% yield. Shareholders receive one JD share for every 21 Tencent shares they own.
Here’s why this is even better than it might seem at first glance…
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This one off special dividend could potentially be the first of many for Tencent over the long-term. I have seen some commentary online calling this ‘a move out of the $IAC playbook’..
More specifically it’s a homage to the great Barry Diller.
This one off special dividend could potentially be the first of many for Tencent over the long-term. I have seen some commentary online calling this ‘a move out of the $IAC playbook’..
More specifically it’s a homage to the great Barry Diller.
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The idea of this is pretty exciting for $TCEHY shareholders. But probably even more exciting for $PROSY shareholders.
Just to give some context for those who are unfamiliar… Here is the Barry Diller & $IAC playbook in a nutshell:
The idea of this is pretty exciting for $TCEHY shareholders. But probably even more exciting for $PROSY shareholders.
Just to give some context for those who are unfamiliar… Here is the Barry Diller & $IAC playbook in a nutshell:
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1.Target a fragmented market that has high future growth expectations.
2.Use M&A to grow within the market.
3.Scale and build quality businesses.
4.Once a business has low expected IRR or unrealised value, spin off and return capital to shareholders.
1.Target a fragmented market that has high future growth expectations.
2.Use M&A to grow within the market.
3.Scale and build quality businesses.
4.Once a business has low expected IRR or unrealised value, spin off and return capital to shareholders.
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Now that’s certainly an oversimplification and does no justice to how great Barry Diller is as a capital allocator. But hopefully you get the idea.
Now here’s how this could benefit Tencent & Prosus shareholders..
Now that’s certainly an oversimplification and does no justice to how great Barry Diller is as a capital allocator. But hopefully you get the idea.
Now here’s how this could benefit Tencent & Prosus shareholders..
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Tencent has definitely followed the playbook so far. They chose a growing, fragmented market in e-commerce. They bought large stakes in public and private companies like $JD, $PDD, Meituan & KE Holdings whilst growing their own, core e-commerce business.
Tencent has definitely followed the playbook so far. They chose a growing, fragmented market in e-commerce. They bought large stakes in public and private companies like $JD, $PDD, Meituan & KE Holdings whilst growing their own, core e-commerce business.
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Now that the E-commerce market is more mature, particularly $JD as a business. Plus the regulatory uncertainties and crackdowns they face in China..
It seems like a great time to spin-off and return a nice yield to shareholders..
Now that the E-commerce market is more mature, particularly $JD as a business. Plus the regulatory uncertainties and crackdowns they face in China..
It seems like a great time to spin-off and return a nice yield to shareholders..
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The additional appeal to shareholders here is that there are plenty of other extremely valuable businesses within the Tencent portfolio that is largely unrecognised by the market.
They have a huge market share in the gaming industry that is full of value.
The additional appeal to shareholders here is that there are plenty of other extremely valuable businesses within the Tencent portfolio that is largely unrecognised by the market.
They have a huge market share in the gaming industry that is full of value.
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Just to name a few potential spin-off contenders that could offer a lot of value to shareholders;
Riot games, Epic games, stake in $SE, Douyu, $ATVI
Then beyond gaming there is stakes in $TSLA, $SPOT $PDD, Nio + a range of different public and private businesses.
Just to name a few potential spin-off contenders that could offer a lot of value to shareholders;
Riot games, Epic games, stake in $SE, Douyu, $ATVI
Then beyond gaming there is stakes in $TSLA, $SPOT $PDD, Nio + a range of different public and private businesses.
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Now for $PROSY shareholders it could be even more appealing. Prosus own 28% of Tencent and their stake in Tencent makes up ~85% of their NAV. They also currently trade at about a 40% discount to NAV.
Now for $PROSY shareholders it could be even more appealing. Prosus own 28% of Tencent and their stake in Tencent makes up ~85% of their NAV. They also currently trade at about a 40% discount to NAV.
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This additional capital that Prosus receive from $JD shares or any future special dividends can be directed to two places;
1.Extremely cheap buybacks whilst at a huge discount to NAV.
2.VC portfolio that has a ~18% IRR.
This additional capital that Prosus receive from $JD shares or any future special dividends can be directed to two places;
1.Extremely cheap buybacks whilst at a huge discount to NAV.
2.VC portfolio that has a ~18% IRR.
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In summary, after Chinese stocks have been beaten down all year, it’s nice to have an interesting value proposition as a $TCEHY and $PROSY shareholder. I’d like to see more and I’m curious as to how this plays out.
Even if the $JD shares are just a one-off.
In summary, after Chinese stocks have been beaten down all year, it’s nice to have an interesting value proposition as a $TCEHY and $PROSY shareholder. I’d like to see more and I’m curious as to how this plays out.
Even if the $JD shares are just a one-off.
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