Tencent (OTCMKTS:TCEHY) is in focus after the company announced tentative plans to divest up to $14.5 billion of investments. While the multinational conglomerate is mainly known for its innovations in technology and video games, it also boasts a massive $88 billion investment portfolio.
Tencent’s $14.5 billion figure is a “soft target” and would depend on market conditions and internal price targets. Reportedly, privately traded Meituan is one of the companies in Tencent’s divestment pipeline.
Meanwhile, Softbank (OTCMKTS:SFTBY) has been divesting its portfolio as well. During the second quarter, the company reported a record loss of $23.4 billion. As a result, CEO Masayoshi Son was forced to take a defensive stance with his portfolio in an effort to keep operations afloat. In August, Softbank has sold about 50 million shares of SoFi (NASDAQ:SOFI) stock, cutting its existing position in half.
3 Big Stocks Tencent Could Sell Off Soon
So, why exactly is China’s largest company mulling on sell out of its investments? Like SoftBank, Tencent has been dealing with a difficult macroeconomic environment paired with inefficiencies caused by Covid-19 lockdowns. During Q2, the company reported its first-ever revenue decline. Revenue declined by 3% year-over-year (YOY) to $19.8 billion, which was partly attributed to declining online advertisement sales. On top of that, net income fell by 56% YOY. Tencent also laid off about 5% of its workforce, or roughly 5,000 jobs.
Tencent has not specified any publicly traded companies in its divestment pipeline. However, the conglomerate owns stakes in hundreds of well-known companies, including Nio (NYSE:NIO), JD.com (NASDAQ:JD) and Pinduoduo (NASDAQ:PDD). Any one of these companies could be at risk of liquidation.
Last December, Tencent announced that it would reduce its JD stake by giving shares out as a dividend. In total, the dividends were worth $16.37 billion. Tencent chose to divest its stake via a dividend to lessen the effect on JD. It is unknown if the company plans on repeating this process of divesting via dividends.
In January, the Chinese conglomerate announced that it had sold 14.5 million shares of Sea Limited (NYSE:SE) worth $3 billion. The sale reduced Tencent’s stake from 21.3% to 18.7%, although the company said it will retain the rest of its stake for the long term.
On the date of publication, Eddie Pan held a long position in SE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
