China’s Tencent acquires 12% stake in Snap as shares plunge

A sign of Tencent is seen during the third annual World Internet Conference in Wuzhen town of Jiaxing, Zhejiang province, China. (Photo: Reuters)

Snap Inc said on Wednesday that Chinese tech and media investment firm Tencent Holdings Ltd had taken a 12 per cent stake in the company, a day after the owner of disappearing-messaging app Snapchat was punished by Wall Street for disappointing quarterly results.

Snap’s shares fell 16 per cent to $12.67, well below their $17 initial public offering price in March, as investors fretted about Snap’s slowing user growth in the latest quarter and viewed Tencent’s move as an investment rather than the precursor to a merger.

“(Tencent) buys all sorts of minority investments, and I don’t think we can extrapolate that this means they intend to take over the company,” said Wedbush Securities analyst Michael Pachter.

Snap said it had only received the details of the stake from Tencent this month. Tencent’s 145.8 million class A common shares of Snap, worth about $1.7 billion at Wednesday’s price, give the Chinese company no voting rights.

Tencent president Martin Lau told Snap his firm is “excited” to deepen its relationship with the firm, Snap said in a regulatory filing. A Snap spokesman declined to comment further.

The Chinese tech company, which owns mobile chat service WeChat, has bought stakes in several companies over the past few years, including electric car maker Tesla Inc and ride services company Lyft Inc. In 2013 it invested in Snap through an affiliate.

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