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Why Stock Dropped Today

By Joe Tenebruso – Dec 23, 2021 at 5:39PM

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A tech titan is shedding its stake in the Chinese e-commerce leader.

What happened

Shares of (JD 7.82%) fell 6.9% after Tencent (TCEHY 1.28%) said it would distribute most of its stock holdings in the online retailer to its shareholders. 

So what

Tencent will pay a special dividend of more than 457 million shares to its investors. Tencent's shareholders will receive 1 share of for every 21 shares of Tencent that they own on Jan. 25, the record date for the transaction. Some shareowners in markets outside of China, however, may receive cash in lieu of shares.

These shares represent roughly 15% of's outstanding stock and 86% of Tencent's holdings in the company. They are valued at approximately $16 billion. 

A person is pointing to a stock chart that rises and then falls.'s stock price declined on Thursday. Image source: Getty Images.

Tencent said that it typically invests in early stage companies that can use its "patient" capital to fund their expansion. It then seeks to divest those investments when these companies "become consistently capable of self-financing their future initiatives." Tencent's board of directors believes is currently in this latter category.

Now what

With a sizable chunk of's shares potentially hitting the market in the coming months, its stock price could come under pressure. Although investors could hold on to the stock they receive via the dividend, many may choose to sell.

Moreover, after Tencent slashes its stake in, it will benefit far less from the online retailer's future success. That will give Tencent less of an incentive to partner with -- and perhaps drive it to compete more aggressively in areas where the two companies overlap.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns and recommends and Tencent Holdings. The Motley Fool has a disclosure policy.

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