Chinese tech giant Tencent has increased its stake in Chinese online retailer site Vipshop to 9.6% from 8.7%, upping its push into the country’s crowded e-commerce industry.
Why it matters: The bigger stake grants Tencent increased control over the discount retailer, something it has sought for the past two years. The gaming and social conglomerate is pushing further onto Alibaba’s turf by leveraging its messaging service WeChat and its online payment systems to drive shopping demand.
- Support from Tencent is expected to fuel the US-listed firm’s expansion, which has seen growth slow as competition intensifies from Alibaba, Pinduoduo, and Xiaohongshu.
- Vipshop’s core base of young, female shoppers complements Tencent’s businesses.
Details: Shenzhen-based Tencent purchased an aggregate of 6.47 million American depositary shares (ADS) in Vipshop for a combined $84.19 million in the open market through a series of transactions from Nov. 25 to Dec. 13, according to a Vipshop filing on Tuesday.
- Tencent acquired the shares through a wholly owned subsidiary at an average trading price of $13.01 per ADS.
- After the transaction, Tencent remains the company’s second-largest shareholder after company CEO Shen Ya, who holds 12.7%.
- Vipshop’s shares on Tuesday climbed 3.5% to a fresh high for 2019 at $14.34 each, boosting its market capitalization to $9.6 billion, but share price remains only half of its historical high of $30.0 apiece from April 2015.
Context: Tencent and JD.com stuck a deal with Vipshop in 2017 to jointly invest $863 million in the online discount retail platform for 7% and 5.5% stake in the company, respectively. Tencent and JD.com’s two-year Vipshop share lockups expire Wednesday.
- Tencent bought 5.8 million Vipshop shares to grow its stake to 7.8% late last year, then further boosted its stake in March this year to 8.7%, according to the company.
- In addition to Tencent, company filings show that JD.com has also boosted its stake in Vipshop to 7.6% in August.
- The company’s total net revenue grew 10% to 19.6 billion yuan ($2.7 billion) in the third quarter, slowing from 16.4% for the same year-ago period.