Chinese tech titan buys Snapchat stake
15pc wiped off stock as app faces fight with rival Facebook
A Chinese tech giant has taken a 12pc stake in photo messaging app snapchat – setting it in direct competition with Facebook.
in the most aggressive move yet by the company, Tencent increased its holding in snap, lifting the firm’s share price by 10pc in after-hours trading.
The rise was a rare bit of good news for snap shareholders who have seen the value of their holdings fall from around $24 when the firm first floated, to as low as $12. Yesterday, the stock fell 14.6pc, or $2.21, to $12.91.
snapchat, founded by tech guru evan spiegel, is a direct competitor of instagram, which is owned by Facebook. Both allow their users to communicate through sending picture messages.
The details of the stake by Tencent, revealed by snapchat after badly received quarterly results, came as Us and Chinese firms announced £7bn in new deals on the arrival of President Donald Trump in Beijing.
it helped snap recoup a slide of almost 20pc in trading in new York after it reported third-quarter revenue and user growth well below expectations.
snap’s privately owned struc- ture, which reserves 95pc of voting rights for its co-founders, means Tencent will not have a say in the running of the firm, and the purchase indicates Tencent is looking to make a profit.
‘While such news may be initially perceived as positive by the market, one has to remember that Tencent’s holdings in snap is the non-voting Class A shares, which makes a possible acquisition of snap by Tencent less likely,’ said Morningstar analyst Ali Mogharabi.
Along with Alibaba and Baidu, Tencent has poured billions from a decade of growth in China into buying Us firms. it holds 5pc of electric car maker Tesla, as well as stakes in ride service company Lyft and augmented reality start-up Magic Leap.
The largest social media and gaming company in China and owner of the popular mobile application WeChat, it had previously invested in snap in 2013.
spiegel, married to the model Miranda Kerr, has described WeChat as a ‘role model’.
‘The positive side of this could be that the two may create a business partnership of some kind, or Tencent may aid snap in expanding its reach into China,’ Mogharabi said.
Unlike many Us corporations, snap does not have to disclose changes in Tencent’s ownership of snap’s Class A stock.
snap said it had only received the details of the stake from Tencent this month and declined to answer questions on the filing.
snap, on Tuesday, reported figures that disappointed the market as it struggles to compete with Facebook’s instagram.
The company’s daily active users tally stands at 178m.