Tencent Holdings Ltd., China’s most valuable company, recently executed its most significant share buyback in nearly two decades following a sharp stock decline. The selloff was triggered by the company’s inclusion on a US blacklist for alleged ties to the Chinese military. This move underscores the company’s commitment to shareholder value amid geopolitical uncertainty.
On Tuesday, Tencent repurchased 3.93 million Hong Kong-listed shares, the highest single-day buyback since April 2006, according to Bloomberg-compiled data. The company surpassed this figure the following day, acquiring an additional 4.05 million shares. These buybacks represent a substantial investment, totaling approximately HK$1.5 billion ($193 million) on Tuesday alone. The aggressive repurchasing activity comes after Tencent’s stock price plummeted by roughly 10% following the Pentagon’s decision to blacklist the WeChat operator.
While Tencent has been proactively enhancing shareholder returns, the scale of these buybacks signals a concerted effort to mitigate the negative impact of the US blacklist. The company has stated its intention to collaborate with the Department of Defense to clarify any misunderstandings and address the concerns that led to its inclusion on the list.
The share repurchase wasn’t the only response to the selloff. Mainland Chinese investors capitalized on the price dip, acquiring HK$14 billion worth of Tencent shares through exchange links with Hong Kong on Tuesday. This influx of buying activity positioned Tencent as the most-purchased stock on that day, demonstrating continued confidence in the company’s long-term prospects among some investors.
Vey-Sern Ling, managing director at Union Bancaire Privee, commented on the situation: “From the statement Tencent put out yesterday you can see that the company thinks the US decision is wrong and the share price response is irrational, which probably warrants a higher share repurchase amount.” However, Ling also acknowledged the heightened geopolitical risks, noting that “some investors will be put off.” The situation highlights the complex interplay between political tensions and market sentiment.
In conclusion, Tencent’s record-breaking share buyback underscores the company’s response to the recent stock market volatility stemming from its inclusion on the US blacklist. While the buybacks demonstrate a commitment to shareholder value and confidence in the company’s future, the lingering geopolitical risks associated with the blacklist continue to present challenges. The long-term impact of these developments on Tencent and the broader market remains to be seen.
