Tencent Shares Are Trading Lower Over Regulatory Crackdown Concerns

Tencent Holdings Ltd TCEHY stock dropped for the second day over regulatory concerns, wiping off $62 billion in market value, Bloomberg reports.

• The stock lost over 4% in Hong Kong on Monday, after a 4.4.% drop on Friday.
• Tencent continued to attract regulatory attention after Alibaba Group Holding Ltd BABA-owned Ant Group’s possible establishment of a financial holding company to include its banking, insurance, and payments services.
• Tencent’s fintech business was valued between $105 billion to $120 billion by Bernstein analysts based on eight times multiple to the division’s trailing 12-month revenue of $15 billion (100 billion yuan). They valued the payments business between $70 billion to $80 billion, and credit, wealth management, and insurance accounting for the remaining $35 billion to $40 billion.
• China’s intense regulatory crackdown on the tech majors could lead to a de-rating of Tencent multiple on any further loss in market value. However, Tencent’s regulatory woes were less malignant than Alibaba, further supported by the company’s robust core business position and the low profile of the top management as per the analysts.
• The antitrust regulator penalized Tencent and other Chinese tech majors on Friday for earlier investments and acquisitions without seeking prior approval. The market is also concerned about a digital gaming crackdown.
• Price action: TCEHY stock was down 7.52% at $82.57 in the premarket session on the last check Monday