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Tencent sells a $3 billion stake in Singapore tech group Sea

Tencent sells a $3 billion stake in Singapore tech group Sea

January 6, 2021: -Chinese gaming and social media company Tencent Holdings has sold 14.5 million shares in Singapore-based gaming and e-commerce firm Sea at $208 each to raise $3 billion, according to a term sheet seen by Reuters on Wednesday.

On Tuesday, When the transaction was launched, Tencent sold the stock at the lower end of the $208.00-$212.00 per share. Tencent and Sea declined to comment on the share sale.

On Monday, the price set was a 6.8% discount to Sea’s last closing price of $223.31 per share.

On Tuesday, Sea shares dropped 11.4% in New York to $197.84 on the back of the divestment news.

The sale of 14.5 million shares is reducing Tencent’s stake in Sea to 18.7% from 21.3%. The company said it is intending to retain the substantial majority of its stake in Sea for the long term.

“The share sale unlocks a portion of the value of Tencent’s investment in Sea, which has seen huge growth and expansion in its global business operations. The divestment is providing Tencent with resources to fund different investments and social initiatives,” the company said in a statement.

Tencent will be subject to a lockup period that restricts the further sale of Sea shares by Tencent during the next six months.

Sea’s U.S.-listed shares slum nearly 8% to $205.5 in early trading and Tencent’s shares closed 0.8% lower at HK$450.

Tencent’s move came just days after the company said it would divest $16.4 billion of its stake in JD.com, which weakens its ties to the e-commerce firm, between pressure from Beijing’s broad regulatory crackdown on technology firms.

Sea says that Tencent and its affiliates had given an irrevocable notice to convert their Class B ordinary shares.

Upon conversion, all outstanding class B shares of Sea will be beneficially owned by Forrest Li, the founder, chairman, and CEO of Sea, whose market value of $124 billion makes it Southeast Asia’s most valued company.

Tencent agrees to terminate its proxy to Li following the conversion.

Sea is proposing to increase the voting power of each Class B ordinary share to 15 votes from three.

“The board believes that, as Sea has scaled huge to become a leading global consumer internet company, it is in the huge interests of the company in to pursue its long-term growth strategies further to clarify its capital structure through the contemplated changes,” it said.

Sea said the changes are subject to approval by its shareholders at its annual general meeting set for February 14.

Once the changes are made, Li’s outstanding Class B ordinary shares beneficially owned are expected to represent nearly 57% of the voting power, up from about 52%.

Separately, Li holds nearly 54% of the total voting power related to the size and composition of Sea’s board of directors.

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