Chinese social media company Tencent Holdings has sold 14.5 million shares in Singapore-based gaming and e-commerce firm Sea at $208 each to raise $3 billion, according to a term sheet seen by Reuters on Wednesday.
Tencent said it had entered into a deal to reduce its stake in the technology group to 18.7% from 21.3%. The company added that it plans to retain the substantial majority of its stake in Sea for the long term.
The sale comes after Tencent said last month it would divest $16.4 billion of its stake in JD.com, weakening its ties to China’s second-biggest e-commerce firm, amid pressure from Beijing’s broad regulatory crackdown on technology firms.
Sea’s shares fell 11.4% on Tuesday in New York to $197.80 following the divestment news. Ahead of the announcement, Sea said Tencent had also agreed to cut its voting stake in the company to less than 10%.
A lower voting right control could reduce any potential conflict if Tencent’s gaming teams plan to publish more games directly in global markets, Citi’s analysts said in a report on Wednesday.
They added that it would also help reduce any “potential geopolitical friction if/when Sea plans to expand more strategically into new markets in more countries”.
Irrevocable Notice
Sea said Tencent and its affiliates had given an irrevocable notice to convert all their Class B ordinary shares.
Upon conversion, all outstanding class B shares of Sea will be beneficially owned by Forrest Li, the founder, chairman and CEO of Sea, Southeast Asia’s most valued company, which has a market capitalisation of $110 billion.
Tencent and Sea declined to comment on the pricing of the share sale.
Sea’s shares have shed 47% from a record high of $372 reached in October but have still risen five-fold in the past three years.
The company started out as a gaming firm in 2009 and then diversified into e-commerce and food delivery, benefiting from roaring demand for its services from consumers, especially during pandemic-related restrictions.
Sea is now expanding its e-commerce operations globally.
• Reuters with additional editing by George Russell
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