In the past two years, China began to crack down on tech companies, wiping billions of dollars of value from its most prominent companies including Alibaba. Then in May, the Chinese government showed signs of easing its crackdown on the country’s tech sector. But little has changed.
As we reported last month, Alibaba founder Jack Ma was forced to give up control of China’s fintech giant Ant Group as part of the effort to move away from affiliate Alibaba Group Holding “after more than a year of extraordinary pressure from Chinese regulators.
Jack Ma is not alone. China’s Tencent Holdings is also planning to sell all or bulk of its $24 billion stake in food delivery company Meituan to appease the Chinese regulators and monetize its eight-year-old investment, Reuters reported, citing four sources with knowledge of the matter.
The planned sale comes against the backdrop of China’s sweeping regulatory crackdown since late 2020 on technology heavyweights that took aim at their empire building via stake acquisitions and domestic concentration of market power.
“The regulators are apparently not happy that tech giants like Tencent have invested in and even become a big backer of various tech firms that run businesses closely related to people’s livelihoods in the country,” one of the sources told Reuters.
Three sources also told Reuters that Tencent, which owns 17% of Meituan, has been engaging with financial advisers in recent months to work out how to execute a potentially large sale of its Meituan stake.
In May 2021, Meituan lost $38.96 billion of its value after the Chinese government’s antitrust crackdown wiped off over $250 billion from Chinese tech stocks. Then in October 2021, China’s top antitrust body fined Meituan more than $533 million for engaging in anti-competitive practices. The fine brought an end to a yearlong regulatory crackdown at China’s biggest provider of food delivery and related services. “We accept the penalty with sincerity,” Meituan said.
Meituan was founded in 2010 by Wang Xing. It was one of China’s most popular internet startups. Meituan-Dianping is a daily deal site for locally found consumer products and retail services. In addition to its food delivery service, Meituan also offers deals of the day by selling vouchers for local services and entertainment.