Tencent’s stake in Huayi Brothers fell from about 7.94% to 4.99%. After this change, Tencent Computer is no longer a shareholder holding more than 5% of Huayi Brothers.
Tencent has held shares for more than 10 years
Tencent’s investment in Huayi Brothers began in 2011. Tencent initially invested in Huayi Brothers, buying Huayi Brothers shares held by Ma Yun, Yu Feng, Jiang Nanchun and others.
According to the announcement issued by Huayi Brothers in May 2011, the company’s shareholders Ma Yun, Yu Feng, Jiang Nanchun, Gao Min, and Wang Yulian sold a total of 27.8 million shares of the company on May 6, 2011, at a price of 16 Yuan/share, accounting for 4.6% of the company’s total share capital.
These shares were all won by Tencent, and Tencent became the fourth largest shareholder of Huayi Brothers. The top ones are Wang Zhongjun, Wang Zhonglei, and Ma Yun.
Since then, Tencent has repeatedly increased capital in Huayi Brothers.
According to Huayi Brothers’ announcement in November 2014, Tencent plans to subscribe for 51.55 million Huayi Brothers shares in cash at a price of 24.83 yuan per share, costing nearly 1.3 billion yuan. By the end of the subscription in 2015, Tencent held more than 8% of Huayi Brothers shares, becoming the second largest shareholder of Huayi Brothers.
Since 2015, Tencent’s shareholding ratio has dropped to about 7.94% due to the exercise of stock options and other matters. However, during this period, Tencent did not reduce its holdings of Huayi Brothers shares until August this year.
The announcement shows that from August 2 to 4, Tencent reduced its holdings of Huayi Brothers shares by 53.89 million shares through block transactions, accounting for 1.94% of the company’s total share capital, and the average reduction price was 2.2 yuan per share. In addition, Tencent lent 27.745 million shares through its participation in refinancing securities, resulting in a reduction of about 1% in the company’s shareholding.
The two combined, the number of reductions reached 81.638 million shares, accounting for 2.94% of the total share capital of Huayi Brothers.
Since 2015, the stock price of Huayi Brothers has “fallen endlessly”. Judging from the price of this reduction, Tencent’s investment in Huayi Brothers has suffered heavy losses.
After the completion of this reduction, Tencent’s total share of Huayi Brothers’ shares has dropped to less than 5%. However, if about 1% of Huayi Brothers shares involved in Tencent’s participation in the refinancing securities lending business are recovered after the loan period expires, its shareholding ratio will still exceed 5%.
“Luxury circle of friends” close cooperation
Huayi Brothers’ shareholder lineup can be described as luxurious. Before Tencent, Ali had invested in Huayi Brothers. After Huayi Brothers went public, the “Ali Department” increased capital in Huayi Brothers several times.
As of the end of 2021, Hangzhou Ali Venture Capital Co., Ltd. holds a 4.47% stake in Huayi Brothers, making it the company’s third largest shareholder. In addition to the 3.6% stake held by Jack Ma, the “Ali Department” holds more than 8% of the total shares.
Huayi Brothers is one of the few companies invested by Alibaba and Tencent at the same time. Having a “luxurious circle of friends” has also become one of Huayi Brothers’ advantages in the film and television industry.
Huayi Brothers has stated in announcements many times before that the company has accumulated a number of long-term and stable strategic partners in its business development for many years.televisionIn addition to Taiwan, video websites and international film companies, it also includes Internet ecological and financial companies such as Tencent, Ali, and Ping An. The trust and support of these partners constitutes the resource guarantee for the company’s leading position to a certain extent.
However, from the perspective of actual business cooperation, Huayi Brothers and Tencent have a closer relationship.
As early as December 2011, Huayi Brothers signed a “Strategic Cooperation Framework Agreement” with Tencent, agreeing to build and operate the “Huayi Brothers Zone” channel, authorize information network communication rights, invest in film and television dramas, and refine the operation of large dramas. In-depth cooperation with integrated marketing, multi-platform joint publicity and promotion projects under Tencent.
In November 2014, the two parties signed the “Strategic Cooperation Framework Agreement” again, agreeing to carry out various modes of cooperation in the game business field, establish a regular high-level communication mechanism between the two parties, and actively explore various cooperation modes between Tencent’s game platform and Huayi Brothers’ game business. And through such cooperation to help Huayi Brothers game business development.
In recent years, the two sides have cooperated in the production and distribution of many film and television dramas. Tencent has almost always been among the company’s top five customers, according to Huayi Brothers announcements.
In recent years, affected by multiple factors, Huayi Brothers’ operating conditions have deteriorated, its performance has continued to lose money, and its stock price has continued to decline. But until 2020, Ali and Tencent have not given up their support for Huayi Brothers.
In April 2020, Huayi Brothers released a fixed increase plan, planning to issue 824 million shares at a price of 2.78 yuan per share, raising no more than 2.29 billion yuan.
There are 9 distribution targets, including Alibaba Pictures, Tencent Computer, Sunshine Life Insurance and other companies. Among them, Alibaba Pictures and Tencent Computer respectively plan to subscribe for the shares issued by Huayi Brothers with no more than 100 million yuan. All the funds raised are expected to be used to replenish working capital and repay borrowings.
But the release did not go well. After several revisions and reviews, the target of this issuance has been changed from the 9 companies initially identified to no more than 35 specific targets. But so far, the matter is still in progress.