What do you do when billions are wiped off your stock market valuation following speculation concerning a potentially crippling change in legislation? That’s right. You make hay while the sun shines and buy back your shares in bulk at an all-new bargain price. Win!
That’s exactly what Tencent is doing right now following the legislative nightmare before Christmas that had tech investors in China running scared. While the potential measures remain the subject of mere proposal (with a consultancy period ending on January 22) changes such as limiting the amount that users can spend, new laws around gacha mechanics and banning daily login incentives could prove disastrous if implemented.
Nevertheless one company seems confident in the market’s imminent bounceback and has continued its ongoing buyback program apace, hoovering up bargain priced stock while the rest of the market wrings its hands and waits for the outcome following that Jan 22 deadline.
That company is (the always in the news) Tencent who have - according to Bloomberg data - bought back a record HK$10 billion ($1.3 billion) of shares in December and are now working faster than ever to put their money where their mouth is in the face of the hi-tech sell-off around them.
Prior to the 12% drop on December 22 2023 - the date that the new legislation proposals were announced - Tencent had been spending an average of HK$375 million per day last year, buying back its own shares. Now, following the drop it has more than DOUBLED that intake, increasing daily purchases to around HK$1 billion… That means that this week alone it's spent over HK$3 billion basically backing itself.
This public show of confidence joins measures such as the government’s scapegoat sacking of a public official who broke the news of the new legislation but - at the time of writing - Tencent’s shares remain 4% down on where they were pre-December 22 bombshell.
Still, it’s certainly a ‘good look’ to pull off and, combined with the news that at least one part of the government seems to love video games (with a record number of new game approvals breaking cover this week), confidence should - they'll doubtless by praying - be on the way back up soon…
Until that happens, for Tencent at least, there’s only one thing for it: Spend, spend spend, buy, buy, buy!
Photo by Jp Valery on Unsplash
