When you’re standing at the foot of a skyscraper straining your neck to look upward and you spot a grand piano emerging from a window on the 51st floor, it takes a certain mindset to remain focused on the positives.
Shareholders in Tencent find themselves in this position, when only last Christmas they were elbowing each other out of the way in the rush to the yacht shop, determined to order a large one with all the toys and not to stint on the gold trimmings.
Since then their baby has been in free fall, largely due to the Chinese government’s decision to kick off a regulatory clampdown on what had previously been a thriving gaming industry. This intervention came from senior politicians, who were once notably described as a “group of appalling old waxworks” by no less a diplomat than Prince Charles. It has created a bottleneck of thousands of games awaiting regulatory approval. In the interim users can play the games but their creators are unable to monetise them.
The problem facing any large company in China, but particularly one such as Tencent with over a billion users on its Wechat messaging platform, is that it needs to keep Beijing happy, otherwise the rug could be pulled out from beneath it at dizzying speed. Tencent had to can its muchheralded launch of Monster Hunter: World a few days after it reached the public, after criticism in state-backed media and official concerns about the social impact of gaming.
This may have created a mighty buying opportunity, but it will take nerve to pick the bottom.