JD.com plummets after Tencent divests e-commerce behemoth stake worth $16.4 billion

• Tencent will issue about 457 million shares of JD.com, as a special dividend to its shareholders 

• Despite the sale of its stock, Tencent said that the two firms will retain a working partnership

Tencent Holdings Ltd. announced on Thursday that it will give away the majority of its shares in JD.com, causing the e-commerce giant to drop.

The company will issue about 457 million shares of JD.com, valued at approximately $16.4 billion, as a special dividend to Tencent shareholders. Tencent now owns 2.3 percent of JD.com, down from 17 percent when it was the company's largest stakeholder.

WeChat's owner said it was the appropriate time for the divestment since the e-commerce business had reached a point where it could self-fund its expansion. 

Read more: China Mobile to raise $7.64 billion in Shanghai IPO

For months,Beijing has been cracking down on China's country's top corporations, citing worries about possible monopolies and data security which resulted in antitrust charges against several of the country's technological behemoths, including Tencent, Alibaba, etc. 

As part of the new agreement, Tencent's president, Martin Lau, resigned from JD.com's board of directors. Despite the sale of its stock, Tencent stated that the two firms will retain a working partnership.

As soon as distribution was announced, JD.com shares plummeted 7.6 percent down in Hong Kong. Tencent shares, on the other hand, increased 4.5 percent

Read more: US blacklists 34 Chinese entities over ties to alleged human rights abuses and IP theft

Tencent shareholders who are eligible will get one share of JD.com for every 21 shares they own.

The Evergrande Story 

In November Evergrande, a Chinese real estate conglomerate said it is selling its full investment in film and television streaming startup HengTen Networks Group for $273 million, concluding a six-year partnership with streaming behemoth Tencent Holdings.

Read more: Chinese biotech firm falls by 16% in Shanghai debut

Evergrande agreed to sell its remaining 18 percent ownership in the online video streaming and Internet home services provider at a 24 percent discount to the stock price of the Hong Kong-listed company. 

The real-estate behemoth said the transaction will result in a $1.1 billion loss since the sale price was much lower than the book value of HengTen's shares at the end of June.

Read more: SEC finalizes rule to delist Chinese firms for not complying audit disclosure requirements

Inputs from WSJ

Picture Credits: Bloomberg