Tencent Holdings said on Wednesday it would distribute its $20.3 billion stake in food delivery firm Meituan in dividend, as it reported a second straight quarterly sales drop, hit by economic slowdown and China’s regulatory crackdown.
Tencent, the world’s largest video game company and the operator of the WeChat messaging platform, said it will transfer 958.12 million shares in Meituan, representing approximately 90.9% of the Class B ordinary shares it held in Meituan.
Tencent owns 17% of Meituan. Reuters reported in August the company planned to sell all or a bulk of its stake in the Chinese super app to placate domestic regulators and monetise an eight-year-old investment. A senior Tencent executive said at the time that was ”not accurate”.
The company has continued to struggle under harsh rules imposed by Beijing on the tech industry and slowing economic conditions.
On Wednesday, Tencent said revenue fell 2% to 140 billion yuan ($19.8 billion) for the three months ended Sept. 31, from 142.3 billion yuan a year earlier.
Analysts on an average expected 141.6 billion yuan in revenue, according to Refinitiv. Up to the previous quarter, Tencent reported double digit growth for almost every three-month reporting period since it went public in 2004, but its expansion has been halted by China’s crackdown on the tech industry that began in late 2020. The Shenzhen-based giant is retrenching, shutting some unprofitable businesses and laying off staff in a bid to return to growth.
In the third quarter, the number of Tencent employees fell by 1,875 to 108,836 as of end-September. The second quarter's number was already down by 5,498, or nearly 5% from the first quarter. Reuters reported on Tuesday that the company has begun a new round of job cuts targeted at its video streaming, gaming and cloud units. Reuters was not able to establish the scale of the job losses.
Demand for video games, a key revenue source for Tencent, remained weak in the quarter, as it has not received publishing approval for any commercial game for more than a year.
A Tencent subsidiary obtained a license in September but it was for an educational game with no monetization.
Domestic gaming revenue shrank 7% to 31.2 billion yuan, while international gaming revenue rose 3% to 11.7 billion.
Online ads sales also declined by more than 5% to 21.5 billion yuan, as advertisers tightened budgets in a weak economy.
Shares in Tencent closed up 2.22% prior to the earnings announcement. Tencent has lost nearly 60% of its market value since a peak in February 2021.
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