Chinese internet giant Tencent buys 12% Stake of Snapchat

Snapchat has got somewhat relief as Chinese internet giant Tencent has bought a 12% stake in the maker of Snapchat.

It has happened on the ground when Snap’s stock had fallen by as much as 20% previous day following poor quarterly results in which the company missed expectations for revenue, earnings and user growth.

As Tencent has announced that it is going buy some stake of the company, it is assumed that it will help bolster the stock somewhat, however shares were still down about 15% on the next day.

The interesting thing is Tencent is behind the WeChat messaging app, has picked up 146 million shares of Class A  stock since the company went public in March. The Chinese internet giant had previously invested in the company when it was raising money in private fundraising rounds.

Snapchat  said, “We have long been inspired by the creativity and entrepreneurial spirit of Tencent and we are grateful to continue our longstanding and productive relationship that began over four years ago.”

While on the other hand, Tencent president Martin Lau said that the company is “excited to deepen its shareholding relationship” and that it “looks forward to sharing ideas and experiences.”

As a result of Snap’s ownership structure, it said it’s not obligated to disclose changes in Tencent’s ownership. That means investors will not have any idea if Tencent increases or decreases its stake. Shareholders of Snap’s Class A shares have zero voting rights, with the company’s voting power resting in the hands of co-founders Evan Spiegel and Bobby Murphy.

Both the partners of the company saw their fortunes drop by $500 million each yesterday. It’s been a rocky ride since the company went public and the partners fortunes have dropped by at least a combined $1 billion in after-hours trading in every quarter since its March IPO. But they are still worth an estimated $2.9 billion apiece, as per Forbes.

Investors of Snapchat remain concerned with slowing user growth on the platform. The daily active users increased just 3% from the previous quarter, which is the slowest growth rate the platform has experienced since the company began disclosing the metric.