Tencent Purchases More Than 10 Percent of Snap's Stake
Chinese internet company Tencent Holdings Ltd. just bought more than a tenth of Snapchat parent Snap Inc.’s stake on Wednesday, after the tech company reported a downbeat third-quarter revenue result.
The world’s fifth-largest internet business by revenue notified the American social media group that it is now holding 145.78 million of its non-voting shares on the open market, taking its total stake to over 10 percent.
Tencent’s purchase accounted for 12.1 percent of the overall outstanding stocks or 10 percent on a diluted basis. Snap had about 1.2 billion outstanding shares as of October 31.
The Chinese internet giant has been a long-time backer of Snap, as it had invested early on during venture capital fundraising rounds.
Snap’s Shares Sharply Fell after Revenue Miss
Snap’s shares took a huge fall in the after-hours on Tuesday, after its revenue result missed analysts’ expectations.
The company reported revenue growth of $207.9 million in the three months ended September 30, less than analysts’ expectation of $236.9 million. Its daily active users (DAUs) rose to 178 million, missing forecasts of 181.8 million as well.
Snap was also set to lose more than $3 billion in value at the open on Wednesday, after its co-founder and chief executive Evan Spiegel confirmed that the Snapchat app will undergo redesigning, in response to the feedback that that the app was difficult to understand or too hard to use.
All losses were almost gone however, following Tencent’s stake purchase. Snap’s shares are currently trading 8.5 percent lower to $13.83.
Spiegel added that there is a high possibility that the redesign of their app will be troublesome to their business in the short term and that they cannot really tell how their community will react to the change when they use the updated version.
They are still willing to go with the plan, despite the risk as they believed that it would very much benefit the company in the long term.
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