Internet companies that are galloping all the way and rushing to grab land are now desperately stepping on the brakes. On August 22, an article launched by Huawei Intranet was signed by Ren Zhengfei, founder of Huawei , mentioned that global economy will face recession and decline in consumption capacity. In the future, the entire company's policy will shift from pursuing scale to pursuing profit and cash flow , and regard "survival" as the main program. In fact, just in the past year, Tencent has continuously reduced its holdings in shares of 6 listed companies, with a total market value (including JD ).
is not just Huawei and Tencent. Nanduwan Finance reporters recently found that since this year, Internet giants have completely shrunk their front lines. The number of foreign investments of Internet giants such as Alibaba , ByteDance, Baidu , Meituan , and Meituan in 2022 has been reduced by half compared with the same period last year. At the beginning of this year, ByteDance even canceled its strategic investment department and spread its employees to various business lines.
"Internet giants are more cautious in the scale of funds, investment quantity, and investment fields, and no longer grab land like before." Many industry insiders said in an interview with Nanduwan Finance and Social Security reporter that the global economy is becoming increasingly declining, and under the domestic regulatory policies to prevent disorderly expansion of capital, Tencent needs a large amount of funds and conducts stock repurchase, and at the same time, the funds that reduce holdings and return can also be used in the new track.
Nanduwan Finance News reporters noticed that the current investment strategies of Internet companies have also begun to adjust, and the focus of investment is tilted towards growth tracks such as hard technology, medicine and health, artificial intelligence , and new energy. Among them, Tencent is still the most invested company.
Current status
Internet investment stepped on the brakes: cash out and cut off non-profit business
According to Tencent’s latest financial report, as of June 30, 2022, the fair value of of the listed company shares held by Tencent Holdings has dropped from 982.8 billion yuan at the end of 2021 to 601.9 billion yuan.
"The reason for the decline in the value of holdings in is related to the overall shrinking of market value. In the first quarter, the stock prices of listed companies such as JD.com, Meituan, and Pinduoduo all fell sharply. On the other hand, it is also the result of Tencent's continuous reduction in holdings and selling assets," securities analyst Pihaizhou told Nanduwan Finance and Economics reporters.
Nanduwan Finance News reporter noticed that from the end of 2021, Tencent has made drastic reductions in its holdings, including HaiLan Home , JD.com, Singapore Donghai Group, BBK , New Oriental , and Huayi Brothers, through dividends and transactions, with a total value of about 130 billion yuan (including JD.com). Among them, Tencent even lost hundreds of millions of yuan to sell Huayi Brothers, which had been investing for 10 years.
Regarding the reduction of holdings of HaiLan Home, Bubugao and Huayi Brothers, Pi Haizhou believes that this is Tencent’s withdrawal from a field that is not closely related to its own business and has poor growth potential. "The businesses of these companies themselves do not have much linkage with Tencent, and some of the investments are even a little blind. Of course, they will sell first if they have money. If you have to make money, you will have to sell them even if you have to make money, otherwise you will only become more and more secure." But some analysts pointed out to reporters that Tencent’s financial pressure is not great, and it is not urgent to cut the money and sell it. "Unless the investment target’s performance is really bad."
’s reduction in holdings in Singapore Donghai Group is more of a normal cash out of financial investment. Pi Haizhou also believes that "as an early investor, Tencent can make a big profit at any time to withdraw from these listed companies. Cash out and exit is a normal behavior during periods of cash flow."
As for JD.com, this year, the four-time OPPO founder of Tencent's OPPO Duan Yongping commented on Weibo on December 24, 2021 that Tencent's "dividend-paid reduction" JD.com can effectively avoid the suspicion of monopoly. Compared with directly selling JD.com's stock, it minimizes the impact of the market."It doesn't feel that it's a bad thing... I guess if this time goes well, Tencent may continue to do this?"
is actually not just Tencent. Huawei's intranet articles also mentioned the direction of future shrinkage adjustment: closing projects that blindly expand or blindly invested; firmly shrink, some countries' businesses should be released when they should be released; the future expectations are very poor, so we must do a good job in cash flow planning, cut off projects that have investment risks, cut off all non-money businesses, etc.
Nanduwan Finance News reporters noticed that Alibaba , ByteDance, Meituan and other Internet companies are also "slimming down". At the beginning of this year, in response to the news of the dissolution of the investment department, a relevant person in charge of ByteDance responded, "The company decided to strengthen its business focus and reduce investments with low synergy."
"The investment of Internet giants has become more cautious overall, including capital scale, investment quantity, investment fields, etc., and no longer grab land like before." Fu Lichun, founding partner and chief economist of Yuntai Capital, said in an interview with Nanduwan Finance and Social Security reporter, "Their investment focus is also changing. Originally, it was mainly related to its upstream and downstream and strong ecology, but now it is slowly transitioning to some areas with relatively small connections with its own industries."
Focus 1 Will Tencent continue to reduce its holdings and cash out?
htmlOn August 16, it was reported that Tencent has been in contact with financial consultants in recent months to study how to implement a plan to sell Meituan shares on a large scale. capital market was moved, and Meituan's stock price once fell by more than 10%. htmlOn August 17, Tencent executives responded to the news in a second-quarter earnings call, saying, "The news is incorrect. Tencent has been optimizing the portfolio, and the group attaches great importance to rebates to shareholders." In addition, Tencent's current stock price is seriously undervalued, and the portfolio value is also seriously undervalued. "For the decisions on investment and share reduction, Tencent's focus has always been on allocating funds reasonably." Tencent executives said they would consider reducing bad investments."Tencent executives' response was that the news of selling Meituan was incorrect, and there were many understandings. In fact, from the perspective of financial returns or regulatory reasons, Tencent still has the opportunity to sell some Meituan stocks. It is hard to say how much they sell, but it will definitely not be sold all of them. After all, Meituan is the leader in the industry and its value to Tencent is still there. Even if the regulatory pressure is put in place, it will not require a single share to be left." Baihui Securities strategy analyst Cen Zhiyong said in an interview with Nanduwan Finance and Social Security reporters, "But Meituan is still losing money, which may be something that Tencent is not satisfied with. Meituan still needs to continue working hard on this."
In fact, after Tencent executives responded, Meituan's stock price rose for two consecutive days, but has not yet returned to the level before the sharp drop, which also reflects that the market expects to worry about Tencent's reduction of holdings in Meituan.
China-Thailand International research report believes that as Tencent dives its non-core assets from , returns to its main business, and releases value by increasing dividends or repurchases, it will be beneficial to the company's valuation repair. If Tencent adopts a similar method to deal with JD Group's Class A common stock in the future and reduces its holdings in Meituan by physical distribution, it will have a smaller impact on Meituan's stock price; if Tencent sells shares in the market like reducing its holdings of US stocks, it will have a greater impact on Meituan's stock price.
Focus 2 Equity Unbinding will affect ecological cooperation?
Tencent’s investment in Meituan was first in 2014. Tencent invested in Dianping, holding 20% of the shares. The following year, Meituan and Dianping merged, and Tencent added an additional $1 billion in investment. Meituan went public in April 2021, and Tencent once again participated in Meituan's targeted share issuance, with a shareholding ratio of 17.2% after the increase.
Comparing Tencent’s investment in Meituan and JD.com, we can see that the two have a very similar strategic position and investment timeline for Tencent. In March 2014, Tencent acquired a 15% stake in JD.com and provided support to JD.com for WeChat and mobile QQ client and other major platforms. In the past eight years of cooperation between the two parties, JD.com's market value has increased 10 times from the initial US$10 billion to US$10 billion.
Meituan and JD.com are also one of the first companies to appear in the Nine Grids of WeChat.
"Tencent itself does not have e-commerce business. On the one hand, it needs to support these e-commerce companies to compete with Alibaba. On the other hand, Tencent's social communication volume also needs to be monetized through e-commerce. Therefore, Tencent invested a large number of e-commerce companies in the early stage to improve its business ecosystem. At present, the cooperation between Tencent and JD.com and Meituan was successful. Tencent has channels for traffic monetization and has improved its own business map. It is not limited to social networking and games, but can also extend offline." Hu Qimu, chief researcher of China Steel Economic Research Institute, told Nanduwan Finance and Economics reporters that Tencent had previously achieved strong business binding through equity investment and occupied a seat in the board of directors, but now Tencent has After achieving deep integration with them, even if there is no equity binding, they will still renew their contracts. "Because they still need each other at the business level, Tencent needs traffic monetization, and JD.com, Meituan, Pinduoduo, etc. also need Tencent's traffic."
In Pi Haizhou's view, "these companies have brought enough ecological benefits to Tencent and completed their listing. Tencent can get rich returns after withdrawal, and will not have adverse effects on itself."
Tencent executives also said at the second quarter financial report meeting that although the company significantly reduced its holdings of JD.com and SEA, they still maintained good business relationships with the two companies.
Exploration Due to the tightening of liquidity and regulatory pressure, the "Cash is King" era is coming
For Internet companies such as Tencent to shrink their fronts in a comprehensive contraction, the industry mainly holds two views: one believes that in the context of a sharp tightening of global liquidity, stable cash flow is an important factor in the sustainable development of enterprises; the other view is that it is affected by regulatory policy factors such as domestic anti-monopoly and preventing disorderly expansion of capital.
's performance has been under pressure for four consecutive quarters
In terms of cash flow, like most Internet companies, Tencent's performance has been under pressure for four consecutive quarters, and its net profit has been dragged down by investment company .
In the second quarter of 2022, Tencent's revenue fell 3% year-on-year, and net profit under non- international financial reporting standards fell 17% year-on-year. Overall, Tencent's revenue fell by 1% year-on-year, and net profit fell by 20% year-on-year under non-international financial reporting standards.
"This year, Tencent itself has also been reduced by major shareholders, and it needs to boost the confidence of major shareholders. In addition, whether it is dividend or repurchase, Tencent needs funds, and its revenue is constantly declining, so it can only cash out by selling previous investments. The second is the regulatory factors of anti-monopoly and anti-capital disorderly expansion. Tencent needs to appropriately reduce its holdings of some investment targets to cooperate with regulatory requirements," Cen Zhiyong, a strategy analyst at Baihui Securities, told Nanduwan Finance and Social Security.
By selling shares of Singapore Donghai Group, Tencent cashed out about 18.5 billion yuan; the way to pay dividends to shareholders JD shares saved Tencent a 100 billion yuan dividend expenditure. According to Tencent's second quarter financial report for 2022, the net amount of other returns reflected in investment income was 4.42 billion yuan, a year-on-year decrease of 78.71%; losses from associates and joint ventures decreased from 6.3 billion yuan in the previous quarter to 4.5 billion yuan.
At the same time, Tencent is also repurchasing its own stocks in large quantities. From January to June this year, Tencent repurchased a total of 18.6 million shares, with a total repurchase price of HK$7.304 billion, far exceeding the repurchase scale of HK$2.6 billion last year.
Regarding the funding issue of stock repurchase, Tencent executives said in the financial report meeting, "In the second quarter, we still created more than 10 billion US dollars of annualized free cash flow . Currently, we still have more than 150 billion US dollars in listed and non-listed investments. Compared with the market value of 370 billion US dollars, we have a large amount of ammunition to continue to distribute dividends and repurchase."
Platform economic regulatory tone tends to be "positive"
2021 is the "big year" of China's anti-monopoly. According to the "China Anti-monopoly Law Enforcement Annual Report (2021)" released by the State Administration for Market Regulation, 175 monopoly cases of various types were investigated and dealt with throughout the year, with increasing by 361.5% year-on-year, and the amount of fines and confiscations was 23.592 billion yuan. Among them, various monopoly cases from the Internet industry account for 74%, and the anti-monopoly fines in the Internet industry account for as high as 92%.
In 2022, strengthening anti-monopoly and preventing disorderly expansion of capital will remain the main tone of standardized development of Internet platforms.On January 5, the State Administration for Market Regulation issued 13 penalty decisions, involving Tencent, Alibaba, Sequoia, Bilibili and other companies, of which Tencent alone accounted for 8. On July 10 this year, the State Administration for Market Regulation released 28 cases of illegally implementing business concentrations in accordance with the law, 12 of which involved Tencent.
"For platform economy , the recent regulatory direction actually tends to be a more positive tone. It includes promoting the healthy development of the platform economy, completing special rectification of the platform economy, and implementing normalized supervision. These key points were also reiterated at the State Council meeting and the Political Bureau of the CPC Central Committee at the end of July. At present, it is more about the supportive policies provided by regulators for the platform economy. We expect that it will take some time for the relevant policy supporting measures to play a role, and we look forward to seeing more (encouraging measures) in the near future." Tencent executives said in the financial report meeting.
Liquidity tightens "Cash is king"
In August this year, SoftBank Group sold 9% of Alibaba shares. The Vision Fund, a subsidiary of SoftBank Group, has also cashed out from many technology companies, such as Uber, real estate trading platform Opendoor, and KE Holdings, which operates the Beike Real Estate service. SoftBank Group said it is to deal with the severe challenges of the current stock environment, eliminate concerns about future cash outflows, and consolidate protective measures for severe markets.
Against the backwards of macroeconomic , domestic and foreign Internet giants have begun to monetize "self-rescue".
"Behind Tencent's share reduction are changes in its own strategic layout, cash flow and operating plans, as well as changes in forecasts for invested companies and related industries. These changes are related to the overall impact of the industry by macroeconomics, and are relatively resonant with the uncertainty and cyclical impact of economic growth," Fu Lichun told a reporter from Nanduwan Finance.
In addition, "In the current economic downturn and sluggish consumer consumption, Tencent, which focuses on consumer Internet as its main business, has been greatly affected, so strategic focus is needed," Hu Qimu pointed out, "Before, Internet giants had layouts on almost all tracks, and now they are shrinking their layout and investing limited resources on a more core track."
Adjustment
Consumer Internet high growth ends profit-taking exit, and investment strategy has changed from "soft" to "hard"
"Investment is one of the core strategies of Tencent Group ", Tencent President Liu Chiping once said. At the Tencent Investment IF Conference held in early 2020, Liu Chiping revealed that as of the beginning of 2020, Tencent had invested in more than 800 companies, of which more than 70 have been listed, and more than 160 have become innovative companies with market value or valuation of more than US$1 billion.
Among these 800 companies, 15 companies have generated more than $1 billion in returns, 6 companies have generated more than $5 billion in returns, and 1 company has generated more than $10 billion in returns. In April 2020, Tencent Investment’s official website was launched. According to the official website, Tencent investment involves six major tracks: entertainment media, consumer retail, people's livelihood education, financial technology , enterprise service and overseas investment.
conversion investment track
Nanduwan Finance News recently found that although Tencent’s investment territory has contracted in the past year, there are still 6 listed companies with an investment ratio of more than 10%, namely Meituan 17.2% shares, Pinduoduo 15.5% shares, Beike 11.5% shares, Kuaishou 21.49% shares, Bilibili 12.4% shares, and Zhihu 12.02% shares. There are two listed companies with an investment ratio of less than 10% and more than 5%, including Vipshop 9.8% and Didi 6.4% of the shares. Among the above companies, Tencent is the largest shareholder of Meituan, Kuaishou and Zhihu; it is the second largest shareholder of Pinduoduo, Bilibili, Vipshop and Beike.
"The first generation of Internet companies are the most popular in the consumer Internet. The consumer Internet is Tencent's basic foundation and its growth engine in the past decade. However, the brutal expansion period of the consumer Internet has ended long ago, the market has become saturated, and the industry bids farewell to high growth."Hu Qimu told Nanduwan Finance and Social News that on the one hand, Tencent should avoid market risks, make profits from the previous investment track, and open up new tracks such as the industrial Internet; on the other hand, it should avoid policy risks. The past traffic-taking gameplay is no longer feasible, and it is necessary to adapt to the national policy orientation to make new investment layouts.
In early 2021, some netizens discovered that the Tencent Investment official website, which had been online for less than one year, was quietly offline. The page after the official website entered the official website was blank. Although
, although the official website was removed from the shelves, Tencent's investment has not stopped. In August this year, the group successively invested in Shenzhen Guangzhou Semiconductor, Shanghai Suiyuan Technology and Yunjing Intelligent. In June, Yunbao Intelligent, a cloud computing and data center data processor chip startup, received hundreds of millions of yuan in financing from Tencent. This is Tencent's third investment in this DPU that has been established less than two years ago company. In addition, Tencent has also entered the medical and health track. Tencent has also frequently flashed in the investment in the new energy track.
Nanduwan Finance Society reporter sorted out the public investment cases disclosed by days eye check and found that in the past year, Alibaba has 38 public investment events; Byte public investment events; and Tencent has more than 190, which is still the most invested company among the Internet giants. Among these investments, it is mainly concentrated in the tracks of hard technology, pharmaceutical health, artificial intelligence, new energy, etc.
early investment, small investment, hard technology
"In the past two years, Tencent has begun to prefer investment in chips, artificial intelligence, new energy and other "hard technology" and support for the real industry. Past investment cases are obviously not in line with the current investment strategy, and even more in line with policy trends. "A person in the investment industry told Nandu reporters, "Strengthening anti-monopoly and preventing disorderly expansion of capital have been the main tone of the development and normative development of the Internet industry in the past year. Now the policy direction is clear. While preventing the wild growth of capital, we must also support and guide the standardized and healthy development of capital. In fact, not only Internet companies, but more and more VC and PE institutions are turning to key technologies such as new energy, biomedicine , chip semiconductors, etc. "
htmlOn August 15, the Ministry of Science and Technology and the Ministry of Finance issued the "Action Plan for Improving Enterprise Technological Innovation Capacity (2022-2023)", which "encourage all kinds of angels to invest in , venture capital funds to support enterprises in innovation and entrepreneurship, implement tax preferential policies for venture capital investment in early, small, and hard technology. ""The changes in the investment direction of Internet companies are closely related to the domestic economic situation and policies. The high-quality development of the economy requires hard technology companies to help. Macro Policy has been guiding these aspects more and more powerful. In the short term, the chip, biomedicine, and new energy tracks are hot under policy guidance. In the long run, the economic structure and focus are turning to high-tech industries, and these industries also have great development prospects and growth rates." Fu Lichun said that from the perspective of policies or industries, the transformation of the Internet investment direction from "soft to hard" is inevitable. , it is also a long-term trend.
Hu Qimu also told Nanduwan Finance and Economics reporters that investments related to hard technology will become a long-term trend of Internet investment. "China's traditional industries are the largest in the world, and they are all facing the demand for digital transformation . The technology and data advantages accumulated by Tencent, Alibaba and other companies in the consumer Internet will be increasingly implemented in various traditional industries in the future. What Internet companies need to do now is to shift from soft power based on business model innovation to hard power based on core technology innovation, which is both in line with policy orientation and in line with market trends. ”
Coordination: Zhen Qin Tian Aili
Editor: Nandu Wancai Society reporter Ma Ningning Intern Qiu Kangzheng
