- Tencent Holdings Ltd (OTC:TCEHY) divested the majority of its stake in JD.com Inc (NASDAQ:JD) from 17% to 2.3%.
- Morgan Stanley believes it could "negatively impact investor sentiment" on JD.com in the near term, but the company is likely to use its share buyback in the next window.
- If needed, it could potentially boost its program while keeping its long-term story intact.
- Analyst Eddy Wang suggests Tencent's move won't materially impact JD.com's fundamentals, given that the company is more supply-chain driven and relies less on traffic than other Chinese e-commerce companies.
- Gary Yu, who covers Tencent, said he believes the decision will "enhance" shareholders' returns, with the divestment being structured as a special dividend, representing a 3% yield.
- Citi analyst Alicia Yap said the decision by Tencent took her by surprise but will not change the relationship between the two companies and will help JD.com broaden its shareholder base.
- "With broader investor base of Tencent, JD's shareholder mix would be improved," Yap wrote.
- "We are buyers of JD shares, especially following the sell-off, and reiterate our positive view on JD's fundamental outlook in 2022."
- Price Action: JD shares traded lower by 7.02% at $68.58 on the last check Thursday.
