The Strategist

Tencent Holdings drops out of top ten world's largest companies

10/10/2018 - 15:50

Chinese Internet giant Tencent Holdings Ltd dropped out of the list of the ten largest companies in the world, losing about $ 220 billion in market value this year.

Chris Yunker
Chris Yunker
Tencent shares have been getting cheaper for the ninth session in a row - this is a record for duration of the continuous price fall period: on Wednesday, the shares fell 1.9% to 288.2 Hong Kong dollars. On the eve, the value fell below 300 Hong Kong dollars for the first time since July 2017. Since January 23, 2018, market capitalization of Tencent has collapsed by almost 40%, and this is the most significant loss of market value of all global companies this year.

In January, Tencent was among the five largest companies in the world along with Apple Inc., Alphabet Inc., Microsoft Corp. and Inc. Now, however, the company has left the top ten, giving way to Exxon Mobil Corp.

On Wednesday, Tencent's capitalization dropped to $ 353 billion, while Exxon’s market value was $ 365 billion. Tencent, seeking to stop the decline in the share price, resorted to buying its own securities for the first time since 2014, but this has not yet helped solve the problem. Since September 7, when the company began to buy back shares, their value fell by more than 7.3%, according to Dow Jones. At the moment, Tencent has spent about 768 million Hong Kong dollars ($ 98 million) to repurchase shares.

Fall in the company's share price since January was the sharpest since Tencent’s IPO in Hong Kong in 2004. Tencent placed shares at a price of 3.7 Hong Kong dollars during an IPO 14 years ago, and during this time up to the January peak, their value has increased more than a hundred times. Tencent's popular online games, as well as applications, including WeChat, have made the company a favorite among both institutional and individual investors.

However, attitude of market participants towards the company has deteriorated significantly in 2018. At the beginning of the year, there were concerns that the prices of Tencent and other major technology companies were seriously overstated. In March, Tencent warned of a reduction in profit margins, and one of the company's oldest shareholders, South African holding Naspers, sold its share worth about $ 11 billion.

Later, Tencent announced a decrease in quarterly profit, which was the first for at least ten years. Restrictions in the field of mobile games, announced by the Chinese authorities earlier this year, have also become a negative factor for the company.


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