The Chinese tech giant has had a successful week following the blockbuster Hong Kong IPO of its e-reader subsidiary China Literature, which doubled on its first day of trading, and now Snap Inc. company filings have revealed that Tencent has bought a $2bn stake in the struggling US messaging platform. The purchase of just short of 146m Snap inc. shares give Tencent a 10% holding in the company on a fully-diluted basis, and Snap said that “Tencent is excited to deepen its shareholding relationship with us, and that it looks forward to sharing ideas and experiences.” Tencent had been a small investor in one of Snap’s funding rounds in 2013 but this purchase is much more significant.
Buying at a Low?
The announcement came the day after Snap released another set of disappointing results, with second-quarter numbers showing user growth of only 4.5m to 173m, and Snap shares had fallen from $15 to $12 in after-hours trading following the poor numbers and a spate of analyst downgrades. Snap had traded as high as $25 on its first day of trading after its IPO in March.
But having Tencent on the shareholder register could be a game changer – the Chinese giant has a market capitalisation of over $470bn and has developed WeChat into China’s dominant messaging app as well as running China’s biggest gaming platform. Snap CEO Evan Spiegel said that the company is in the process of overhauling its app and input from Tencent could help in its battle against Facebook’s Instagram and Google’s “Stamp” project.