Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Huya and DouYu Deal Comes Under Chinese Regulatory Scrutiny

By Rich Duprey - Dec 14, 2020 at 11:28AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Antitrust regulators are taking a closer look at the internet tech sector.

Huya ( HUYA -7.55% ) and rival DouYu International ( DOYU -8.27% ) dominate Chinese live-streaming, owning 80% of the game steaming market between them. Their planned $6 billion merger is poised to create an industry titan.

No one will fare better than Tencent ( TCEHY 1.33% ), as it owns a stake in both companies and will have a 67.5% voting interest in the new company after joining in the union. The merged successor company of Huya and DouYu would have over 300 million monthly active users.

However, the plans have been put in turmoil as China's regulators announced they are going to take a closer look at the merger as part of an antitrust crackdown.

Magnifying glass looking at financial statements

Image source: Getty Images.

Regulatory domino effect

Beijing fined Alibaba ( BABA -3.95% ) 500,000 yuan, or about $76,500, for failing to seek regulatory approval before increasing its ownership interest in department store chain Intime Retail Group. It also fined China Literature, a Tencent spinoff, for not reporting its 2018 acquisition of New Classics Media, a TV production unit.

In announcing the fines, the State Administration for Market Regulation (SAMR) antitrust watchdog specifically cited the Huya and DouYu tie up as the reason why it was going to more closely scrutinize internet tech deals.

It said it wanted the fines to be "a signal to society that anti-monopoly supervision in the internet field will be strengthened."

For the first time ever, the SAMR issued regulations last month laying out what it deems to be anti-competitive behavior. The regulations cover areas that include pricing, payments, and the use of data to target shoppers.

The new rules followed the regulators essentially putting a stop to the IPO of Alibaba-affiliated Ant Financial.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tencent Holdings Limited Stock Quote
Tencent Holdings Limited
TCEHY
$59.23 (1.33%) $0.78
Alibaba Group Holding Limited Stock Quote
Alibaba Group Holding Limited
BABA
$122.49 (-3.95%) $-5.04
HUYA Stock Quote
HUYA
HUYA
$7.96 (-7.55%) $0.65
DouYu International Holdings Limited Stock Quote
DouYu International Holdings Limited
DOYU
$2.55 (-8.27%) $0.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
656%
 
S&P 500 Returns
144%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.