Baba, Tencent, Xiaomi are backers of big US IPOs

Signage for Alipay digital payment services from Ant Group, a subsidiary of Alibaba, and WeChat Pay from Tencent will be displayed outside a currency exchange office in Hong Kong, China on Tuesday, September 1, 2020.

Chan Long Hei | Bloomberg | Getty Images

BEIJING – As China’s anti-monopoly and data security penetration restrictions creep in the restrictions on US public offerings, analysis shows that some of the country’s largest tech companies are heavily invested in these overseas stock offerings.

Gaming and social media giant Tencent is by far the dominant corporate shareholder, holding significant stakes in half of the 25 largest fundraisers run by Chinese companies that have issued American Depositary Receipts (ADRs) in the United States since 2017. This emerges from a CNBC analysis of publicly available data accessed by Windinformation and S&P Capital IQ.

Chinese e-commerce giant Alibaba has some stakes in the list of 25 companies, while other large Chinese tech companies like Xiaomi, Meituan and Baidu each have stakes in one or two of the stocks, the analysis found. US asset managers BlackRock and Vanguard also made frequent appearances, typically with smaller holdings.

While Shenzhen-based Tencent is best known for its video games and the WeChat messaging app ubiquitous in China, the company has also grown into an investment giant.

Tencent’s stakes in publicly traded companies rose 785.11 billion yuan ($ 122.7 billion) last year, more than its 160 billion yuan ($ 25 billion) in earnings for the year, according to the company’s annual report. That doesn’t include its subsidiaries.

The company itself is the largest listed company in Hong Kong by market valuation.

Tencent said Saturday it was informed by the market regulator of “its decision to halt the merger of Huya and Douyu based on the results of their antitrust investigation.” Both companies are Tencent subsidiaries that have been listed in the United States for the past three years.

However, on Tuesday, the Chinese market regulator announced that it had approved Tencent’s deal to privatize US-listed search and text input company Sogou.

Regulation is tightening

For many startups in China, supporting a large tech company often meant access to huge amounts of data on consumer preferences.

But China’s internet industry has also been ruthless. In a 2018 book called “AI Superpowers, China, Silicon Valley and the New World Order,” Google’s former China chief Kai-Fu Lee said the local tech world was similar to gladiatorial fights where nothing was forbidden from copying Innovations up to starting smear campaigns.

After years of loose regulation, China has stepped up its crackdown on massive, indigenous tech giants in recent months.

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The ride-hailing app Didi – which Tencent has invested in – carried out a massive US IPO on June 30th. Within five days, China’s cybersecurity agency initiated an investigation into data usage by Didi and subsidiaries of two Chinese companies recently listed in the US, citing national security concerns

The regulator, the Cyberspace Administration of China (CAC), also said that registration of new users would be suspended in the meantime.

Over the weekend, CAC also announced that companies with data of more than 1 million users are likely to need a permit before being listed overseas.

The increased scrutiny of the data follows regulators’ crackdown on technology companies since last fall for monopoly practices, which resulted in authorities fining Alibaba $ 2.8 billion.

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