Written by Brenda Nakalema

Tencent leaves, JD.com stock drops

The Chinese social media and gaming giant reported on Thursday that it would reduce its stake in JD.com and distribute …

The Chinese social media and gaming giant reported on Thursday that it would reduce its stake in JD.com and distribute its $16.4 million stake to shareholders in the form of dividends. JD.com (Ticker: JD) shares dropped more than 7% following this news. On the other hand, Tencent (700.HongKong) rose 4%. The stock has been down nearly 40% since its January high.

According to a Hong Kong filing exchange, Tencent plans to sell 457.3 million Class A shares in JD.com, which amounts to roughly 86.4% of its total stake and almost 15% of the online retailer’s total issued shares. Tencent President Martin Lau will resign as director of JD.com.

After all is said and done, Tencent, which currently controls about 17% of JD.com, will hold only 2.3% of the e-commerce company’s shares. According to Tencent, the company’s strategy is to invest in companies at their development stage and exit the investments as the companies become stable enough to self-finance their future. The company said in a statement that it believes JD.com had reached an operational level at which it could now ably manage its own growth and future plans and therefore belives this to be an appropriate time to transfer the majority of its shares to investors.

After the deal, U.S retail giant Walmart (Ticker: WMT) will become JD.com’s largest shareholder with a 9.3% stake. Tencent started to invest in JD.com in 2014 and was instrumental in arming the company for the fierce competition against Alibaba (Ticker: 9988. Hong Kong).

Amidst all this change, Chinese tech stocks have been battling regulatory pressure brought on by the ongoing crack-down of Tech giants. For months the Chinese regulatory authorities have been on the warpath- killing any company found in violation of its newly enacted laws surrounding issues as far-ranging as anti-monopoly to data security.

The social media platform WeChat was recently restricted from merging its two popular online videogame sites, and was ordered to terminate exclusive music copyright agreements by regulators.