Shares of Tencent (OTCMKTS:TCEHY) opened in the red following “signs” that Prosus NV (OTCMKTS:PROSY), the company’s largest shareholder, would continue sales of TCEHY stock. Bloomberg reported that Prosus plans on depositing 96 million shares into Hong Kong’s stock clearing system, which is “typically a precursor to selling.” These shares are worth about $4.4 billion.
“It’s likely that Prosus will speed up their selling of Tencent shares when it’s near the level of HK$400,” said UOB Kay Hian Executive Director Steven Leung. “Tencent has been buying back their shares to offset the market impact of big holders selling every day, but still, such negative news would always cause some concern.”
The global investment firm first began selling shares of TCEHY in June of 2022 in an attempt to shore up capital for share buybacks. As of January, Prosus had sold more than 193 million shares worth about $7.2 billion.
TCEHY Stock Falls on More Potential Sales From Prosus
CEO Bob van Dijk previously said that the sale process would execute in “small chunks” of between 3% and 5% of the average daily trading volume. In an email, a Prosus spokesperson noted, “We continue with our open-ended share repurchase program of Prosus and Naspers shares as per our previously announced strategy.”
To its credit, Tencent hasn’t been sitting idly while its largest shareholder pares its position. Since March 27, the technology and entertainment conglomerate has repurchased 8.3 million shares. Shares of TCEHY are down about 1% since March 27.
So, how do other Tencent shareholders feel about the company? According to WhaleWisdom, a total of 41 13F filers disclosed a stake in TCEHY during Q4, an increase of three filers from the prior quarter. Of those filers, only one holds Tencent in their top ten positions. It should be noted that WhaleWisdom’s list of 13F filers only includes institutions required to file a 13F form. So, some foreign shareholders, like Prosus, are not included on the list.
For now, shareholders of TCEHY should expect some short-term volatility if Prosus sells more shares. However, these sales will not affect the company’s long-term fundamentals, just short-term shareholder sentiment.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.