Tencent is currently investing more than HK$1 billion daily in its own shares
In the aftermath of a significant plunge in its stock market valuation following legislative concerns, Tencent is taking proactive steps to rebound by capitalizing on an opportune buyback opportunity. The recent legislative turbulence, aptly termed the “legislative nightmare before Christmas,” sent shockwaves through China’s tech investor community. While proposed measures, including spending limits for users, regulations around gacha mechanics, and potential bans on daily login incentives, are still under consideration, the uncertainties have prompted Tencent to make strategic moves.
Undeterred by the looming legislative changes, Tencent is forging ahead with its buyback program, seizing the chance to acquire shares at a new and advantageous price point. The company’s confidence in the market’s resilience is evident in its record-breaking buyback activity, amounting to a staggering HK$10 billion ($1.3 billion) in shares during December.
Before the sharp 12% drop on December 22, 2023, coinciding with the announcement of proposed legislation, Tencent had maintained an average daily buyback expenditure of HK$375 million throughout the previous year. However, in response to the market downturn triggered by legislative uncertainties, Tencent has doubled down on its buyback efforts, ramping up daily purchases to approximately HK$1 billion. This week alone, the company has allocated over HK$3 billion to bolster its own shares, showcasing a resolute commitment to its financial strategy.
This bold move by Tencent reflects not only its belief in a market bounceback but also serves as a public demonstration of confidence during a challenging period. Despite the company’s shares remaining 4% lower than pre-December 22 levels at the time of writing, Tencent’s proactive approach stands out as a strategic response to market dynamics.
Alongside Tencent’s assertive financial measures, other noteworthy developments include the removal of a public official deemed responsible for leaking details of the impending legislation. Additionally, the gaming industry received a positive nod from at least one government sector, as a record number of new game approvals surfaced in recent weeks.
While uncertainties persist, Tencent remains undeterred, opting for a spend-and-buy approach as it navigates the volatile landscape. The company’s resilience and confidence in its strategic choices suggest that, despite the current challenges, Tencent anticipates a positive turn of events in the near future. As the market awaits further developments post the January 22 deadline, Tencent’s dynamic financial maneuvers position it as a key player adapting to the ever-evolving landscape of China’s tech sector.
Source: adapted from an article by Daniel Griffiths, Editor for PocketGamer.biz.