What happened
Shares of China's video game streaming platform operator DouYu International Holdings (DOYU 2.85%) are lower by 14.6% as of midday on Tuesday. The sell-off is in response to reports that its intended merger with the similar game-streaming and esports broadcast service from HUYA (HUYA 4.17%) -- orchestrated by Huya stakeholder Tencent Holdings (TCEHY 3.04%) -- has been blocked by China's antitrust regulators.
So what
Reuters broke the story, naming "people familiar with the matter" as sources. Given the country's recent string of antitrust efforts that similarly impacted China's ride-hailing service, DiDi Global (DIDI 3.50%), down more than 20% today itself, the report is credible.
Image source: Getty Images.
The intended deal was announced last year, with Tencent planning to merge DouYu and HUYA into one entity that would control roughly 80% of China's game-streaming industry according to numbers from MobTech. Such a deal would have cooled expensive competition between the country's two biggest video game streaming and esports services, as well as competition with Tencent's own live-streaming platform, called Penguin.
Now what
For investors, the smart move from here depends on the stock in question.
DouYu arguably needed the merger to happen more than HUYA or Tencent did. Given its unlikely chances of panning out now, stepping in after this dip is little more than speculation. Tencent shares are down nearly 4% on Tuesday, as cementing this deal would have effectively offered it complete control of China's online distribution of the esports events and live game streaming market. To the extent live-streaming is a growth engine for the video game industry, Tencent shareholders should at least keep close tabs on what happens from here. As for HUYA, it's affected the least as it was and is profitable -- and growing -- without the merger materializing.
