Tencent's Portfolio of Assets: An Overview
Tencent (TCEHY 3.03%) is among the globe's leading internet and tech companies. Based in China, it operates some of the world's most popular communications tools and video games. Besides social media, Tencent is involved in cloud computing, advertising, financial technology, and more. Its vast investment portfolio includes countless companies, some of which it fully owns and others where it holds significant stakes.
Over a billion individuals utilize Tencent's social media apps each month, empowering them to communicate, share videos, make payments, and shop. However, social media is just a piece of the vast global technology empire operated by Tencent.
Let's delve into the intricate details of Tencent's massive tech operations and investment portfolio, while also exploring potential future acquisitions. Understanding what Tencent owns and where it might invest next is a crucial aspect of investment research.
Current Assets
What companies does Tencent currently own?
Tencent is a Chinese tech colossus and holding company that boasts a variety of wholly-owned subsidiaries and significant stakes in other companies, thanks to its expansive investment portfolio. Listed below are the ten most prominent subsidiaries and investments by Tencent.
Weixin/WeChat
In 2011, Tencent introduced the Weixin/WeChat social media app, which later evolved into a multifunctional app providing messaging, payment services (Weixin Pay/WeChat Pay), and various financial offerings. As of early 2024, Weixin and WeChat had nearly 1.4 billion monthly active users.
Tencent launched its instant messaging and social media app QQ in 1999. Over the years, it has expanded and transformed, offering users various services such as online social games, music, shopping, microblogging, movies, group, and voice chat software. QQ boasted more than 550 million mobile device monthly active users as of early 2024.
Tencent Games
Established in 2003, Tencent Games has since grown into a major video game publisher. Tencent has acquired several gaming companies, including Riot Games (developer of League of Legends) and Supercell (creators of Clash of Clans). It also holds substantial stakes in gaming giants like Ubisoft Entertainment (maker of the Assassin's Creed and Tom Clancy series) and other game studios like Larian Studios and Remedy Entertainment.
Tencent Music Entertainment Group
Tencent formed Tencent Music in 2016 by purchasing China Music Corporation. It has since grown into the leading online music and entertainment platform in China, boasting popular apps such as QQ Music, Kugou Music, Kuwo Music, and WeSing. Although Tencent Music is a publicly traded company, Tencent retains control over its voting rights and maintains a majority shareholding.
Epic Games
Tencent made a strategic investment in Epic Games (creators of Fortnite) in 2012, holding an estimated 40% stake in the gaming company. Epic Games counts Sony, Disney, and the Lego Company owner Kirkbi A/S among its minority shareholders. Tencent's investment helped fund Epic's growth, while Epic also developed the Unreal Engine, a popular game engine technology used by multiple gaming studios globally, including Tencent.
Sea Limited
Tencent owns the largest stake in Singapore-based consumer internet company Sea Limited (SE 0.59%). By mid-2024, its shareholding in Sea Limited amounted to less than 20% of outstanding shares (broken down to less than 10% in terms of voting power). Although Tencent sold some of its shares in 2022, it has committed to retaining its remaining stake to participate in Sea's future success and maintain their existing business relationships.
E-commerce
E-commerce is the buying and selling of goods online and the supporting businesses
WeBank
In 2014, Tencent and other companies created WeBank – China's first digital bank. Tencent has a 30% stake in the private bank, collaborating with WeBank to offer credit to users on its platforms. WeBank was the biggest digital bank in the world in 2023, boasting 362 million users, according to Statista.
Nu Holdings
Tencent initially invested $180 million in Brazilian financial technology company Nu Holdings (NU -0.67%) in 2018. By mid-2024, its stake had grown to over 244 million shares worth about $2 billion, making it Nu Holdings' second-largest shareholder (with a 6.7% stake in outstanding shares). Nu Holdings has expanded into one of the largest digital banks globally, with over 100 million customers across Brazil, Mexico, and Colombia.
Nio
Tencent was an early investor in Chinese electric vehicle manufacturer Nio (NIO 1.85%) in 2016. In 2022, the companies agreed to collaborate on autonomous driving and high-definition mapping. Despite gradually reducing its ownership in Nio over the years, Tencent remained its largest shareholder in mid-2024 (2.5% stake worth over $250 million).
Snap
Tencent purchased a significant stake in the social media platform Snap (SNAP 0.71%) in 2017, following a significant drop in its share price. By mid-2024, Tencent had become Snap's largest shareholder, holding approximately 17% of the company, equating to nearly $4 billion in value. Tencent's investment in Snap is just one of the many passive investments the company has made in U.S. companies as part of its broader investment strategy.
Future Acquisitions
Which Companies Could Tencent Acquire in the Future?
As an avid acquirer, Tencent often purchases companies to boost its existing businesses and expand its investment portfolio. While primarily investing in Asian technology companies, Tencent has shown interest in flexing its muscles in global fintech, electric vehicle, and social media sectors.
Tencent has had significant success in the gaming industry, acquiring stakes in various gaming companies. For example, it owns 30% of Larian Studios and a 15% stake in Remedy Entertainment. In 2024, it bolstered its gaming portfolio by purchasing TikTok owner ByteDance's video game units.
Given Tencent's success in gaming, there's a strong possibility it will continue focusing on the sector. One intriguing target is Hasbro (NYSE:HAS), which owns popular franchises like Dungeons & Dragons. Rumors swirled that Tencent contemplated buying the game from Hasbro in 2024 through its investment in Larian Studios.
Tencent might be motivated to bolster its gaming portfolio due to the lackluster performance of its gaming business in recent years. Despite launching numerous new games, some failed to meet expectations, while its competitors delivered blockbuster hits. To stay competitive and drive growth, Tencent could adopt a more aggressive investment strategy within the gaming sector.
Beyond gaming, Tencent will likely continue investing in other ventures, such as music. The company and its Tencent Music subsidiary invested $70 million to acquire a 10% stake in Thailand's GMM Music in mid-2024, helping the music company expand its business and seek independence from its parent company.
Tencent's investment in GMM Music mirrors its strategy of supporting music technology companies worldwide, ultimately growing its music business unit. Expect Tencent to continue making similar investments throughout the music industry.
Tencent isn't just looking at bolt-on investments for its own industries but also aims to invest in innovative technologies through its investment portfolio. For example, Tencent became the largest shareholder in Lilium (NASDAQ:LILM), a German company working on air taxi technology. Tencent's financial backing has helped Lilium fund research and development projects, with Tencent acquiring over a quarter of the company's outstanding shares in early 2024.
Tencent has shown a keen interest in emerging tech trends, including cloud computing, AI, and blockchain. According to reports, the company plans to invest $70 billion into new technology and infrastructure over the next few years. Additionally, Tencent has made investments in various technology companies, such as AI chip startup Enflame and Zhipu, a rival to OpenAI.
Given its increasing focus on AI, it seems likely that Tencent will continue to invest in AI startups. The company believes in becoming a top-tier AI company, having introduced its Hunyuan AI model in 2023.
Finally, Tencent aims to diversify its portfolio by investing in up-and-coming growth sectors, such as healthcare. In recent years, Tencent has invested in healthcare startups, including Chinese stem cell therapy developer Bioon. With China's aging population set to drive demand for healthcare services, this sector could be a lucrative opportunity for Tencent to exploit.
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The Bottom Line on Tencent's Investments
Tencent is a Chinese tech titan known for its popular Weixen/WeChat super app, making it a dominant player in social media and payments. Subsequently, Tencent has used its profits to invest in other companies, evolving into a diversified conglomerate and holding company.
Tencent has shown its ability to identify promising opportunities, whether it's in gaming, music, or emerging technology. By continuing its acquisition and investment spree, Tencent is likely to remain a force to be reckoned with within the Asian technology landscape. Investors seeking to tap into faster-growing industries with a geographical focus on Asia may find Tencent's stock an attractive proposition.
Tencent has nearly full control over Riot Games, obtained major shares in 2011 and completed the acquisition of remaining shares in 2015. However, the tech giant consented to relinquish some possession of Riot to its workforce in 2022.
In the context of Matt DiLallo, he holds short call options for December 2024 at $120 for Walt Disney. Our platform owns shares in Sea Limited, Tencent, and Walt Disney, also recommending Nu Holdings. Our platform abides by a disclosure policy.
Tencent's significant investment in Epic Games, the creators of Fortnite, has helped fund Epic's growth, allowing them to develop the Unreal Engine, a popular game engine technology used by multiple gaming studios globally, including Tencent itself.
To stay competitive in the gaming industry, Tencent may consider a more aggressive investment strategy and could potentially acquire companies like Hasbro, which owns popular franchises such as Dungeons & Dragons.
Understanding Tencent's investment strategies and potential future acquisitions is essential for investment research, as it helps investors identify potential opportunities in the Asian technology landscape.
