Many early backers of some of China’s most successful tech companies are starting to withdraw their support, according to an article in Forbes. In one high-profile example, the South African-based Naspers reduced much of its stake in the gaming and social media company Tencent, selling off 1.1 million shares and dropping its stake to under 28%. And Naspar’s international investment division also signaled that it was shifting about $7.6 billion worth of shares into the Hong Kong Central Clearing and Settlement System, ostensibly to fund buybacks of their own shares.
The move comes amid news that SoftBank recently sold off its own stake in the e-commerce company Alibaba, and Berkshire Hathaway lowered its stake in the EV company BYD, a sign that many major investors in tech believe that the huge fortunes generated over the last decade will likely not come back, the article posits. Last month, Tencent posted the first revenue decline its seen since 2014, and present economic conditions in China make it unlikely to get back on track any time soon as the gaming industry deals with stricter regulations and ongoing Covid lockdowns.
For its part, Alibaba’s Southeast Asian division is looking abroad to Europe for renewed opportunities by increasing its stake to 11% in Ubisoft (maker of the popular game Assassin’s Creed), upping Ubisoft’s value to $10 billion, and claiming a 16.25% stake in Elden Ring creator FromSoftware. But it remains to be seen whether or not Alibaba and Tencent can lure investors back, with their shares dropping more than 1/3 of their value over the last year.
Meanwhile, BYD faces negative investor sentiment and wavering growth momentum. Some strategists point to the company’s high valuation based on current price-to-earnings ratio, as well as the possibility of favorable government policies, such as tax exemptions for EV buyers, being phased out in the coming years as enthusiasm wanes. Investors who garnered enormous returns in the last several years from China’s tech industry, especially those who got in early and won big, are now looking for security for all those profits in an uncertain economic future, the article concludes.