Alibaba, Tencent fall on report Beijing taking golden shares

Alibaba and Tencent shares slid Friday on a report that government entities are set to take so-called “golden shares” in units of China’s two largest internet firms, suggesting Beijing is moving to exert greater control over the sector.

An arm of the Cyberspace Administration of China took 1% of an Alibaba digital media subsidiary in Guangzhou on January 4, according to corporate database Qichacha. The company’s media portfolio includes businesses such as streaming platform Youku and mobile browser UC Web. A new director who shares the name of a CAC official was appointed that same day, records showed, confirming a Financial Times report.

The fund vehicle that bought into Alibaba is backed by the CAC along with prominent state firms such as CITIC, China Post and China Mobile, the database showed. Discussions are also underway about a government entity taking a similar stake in a Tencent subsidiary in mainland China, a person familiar with the matter said. The Financial Times reported the consideration earlier.

The discussions are emerging as Beijing prepares to loosen its grip on the world’s largest internet arena and move past a bruising crackdown that’s enveloped most every internet sphere for well over a year. Signs are growing that Xi Jinping’s administration, keen to revive the world’s No. 2 economy, is reversing course on campaigns against gaming addiction and preparing to unfetter firms such as Alibaba that drew government scrutiny.

“To me, the news is slightly positive,” said Banny Lam, head of research at Ceb International Inv Corp Ltd. “The two have been struggling with the issues of crackdown in recent years. For both Alibaba and Tencent, the government stake could potentially help them to get greenlights to do businesses in new areas and lower the risks of further clampdown by the regulators.”

Tencent dipped more than 2% while Alibaba was down as much as 1.6% in a largely unchanged Hong Kong market.

Chinese state organs have for years invested billions of dollars into high-profile private firms startups from Didi Global Inc. to Jack Ma’s Ant Group Co. In recent years, as Beijing clamped down on every sphere of the internet, official agencies have also taken nominal stakes of typically 1% — a golden share that in theory allows Beijing to nominate directors or sway and veto important company decisions. TikTok-owner ByteDance and Weibo Corp. are among the major internet firms to have disclosed that sort of arrangement.

A Tencent spokesperson declined to comment, while an Alibaba spokesperson didn’t respond to a request for comment.

© 2023 Bloomberg

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