Tencent Holdings is in the midst of getting ready to spin off its eBook operations, Bloomberg News reported Thursday. The move comes as the firm would bring those shares onto a Hong Kong exchange, and the announcement comes in the wake of fourth quarter results for the consolidated company that slipped below analyst estimates.
The spinoff, said the newswire, was announced amid increased spending on the payments side of the business and on efforts to provide content that will prove to be sticky for users of WeChat.
All told, the company showed 47 percent growth in net income to about $1.5 billion, or 10.5 billion yuan. That was below the 11 billion yuan expected. It was, however, a bit faster than the 44 percent in top line growth to just under 44 billion yuan.
In the continued landscape of investment, margins will have to suffer, but Bloomberg said that management is prepared to weather at least some impact here for long-term growth. The messaging service has been and is wide enough in scope to embrace food delivery and ride hailing, said Bloomberg. Shares have been muted in activity, down roughly two percent, at 219 Hong Kong dollars.
Chairman Ma Huateng told reporters that payments exist “as an infrastructure; that’s why even as user numbers grow fast, bank fees grow as well, so what we generate is similar to what we invest. A lot of our cloud business is also in the investment phase; that’s why costs in the short term will be high.”
The IPO of China Reading, the eBook business, may possibly be valued at $500 million in an offering and other spinoffs may be in the offing. In the meantime, messaging via WeChat is deploying mini programs that seek to keep 889 million users content, with everything from payments to newsfeeds.
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