Meituan shares tank 9% after Tencent apparently prepares to divest stake

Meituan shares tank 9% after Tencent reportedly plans to divest stake

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Meituan is among China’s biggest food shipment business. Delivery chauffeurs can be seen zipping around Chinese cities. Tencent very first backed competitor Dianping in 2014 which combined with Meituan to form the existing business.

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Shares of Chinese food shipment giant Meituan plunged 9% on Tuesday after Reuters reported Tencent is preparing to offer most of its $24 billion stake in the business.

Tencent, which owns 17% of Meituan, is preparing to soothe domestic regulators and capitalize its eight-year-old financial investment, Reuters reported, mentioning 4 sources with understanding of the matter.

A Tencent representative stated it does “not comment on market speculation” when gotten in touch with by CNBC. Meituan was not instantly offered for remark.

Shares of Tencent closed 0.8% greater in Hong Kong.

Tencent, which owns China’sNo 1 messaging app WeChat, is aiming to start the share sale this year if market conditions agree with, Reuters reported.

A source with understanding of the matter informed CNBC that there are no existing prepare for Tencent to offer its Meituan stake.

Tencent purchased a business called Dianping in 2014 which then combined with Meituan a year later on to form the existing entity.

Investments made by China’s innovation business have actually come under analysis as part of Beijing’s sweeping crackdown on the nation’s giants. Chinese authorities have actually aimed to check the power of innovation giants through tighter guideline in locations varying from antitrust to information defense.

Reuters reported that part of Tencent’s thinking behind the divestment of the Meituan stake is pleasing regulators stressed over tech giants backing business carefully associated to individuals’ incomes.

Over the previous couple of months, Tencent has actually been divesting stakes in a few of its greatest financial investments.

In December, Tencent stated it would divest the majority of its stake in China’s second-largest e-commerce gamer,

In January, Tencent raised $3 billion through the sale of a few of its shares in Singapore- based video gaming and e-commerce company Sea.

Tencent’s share sales come at a time of slowing development for the Chinese innovation giant, which has actually been struck by a downturn on the planet’s second-largest economy and more stringent guideline on the domestic video gaming sector. Tencent is China’s greatest video gaming company.

Read the complete Reuters report here.