Chinese tech giant Tencent is making a killing on its Snap investment

pulse

February 8, 2018 7:47 PM

The Chinese investment firm is the largest stakeholder in Snap.

Chinese tech giant Tencent is Snap's largest shareholder, owning 17%.
The firm has likely seen a hefty gain thanks to Snap's stock, which on Wednesday climbed above its initial public offering price for the first time since July.

Tencent’s bet on Snap seems to be working out.

The Chinese tech giant, which has a market cap of more than $518 billion, snapped up 146 million shares of Snap in November, public filings show. The prices at which Tencent made its purchases are unclear, but Snap shares have surged 25% since then, thanks to the social-media company’s recent earnings beat.

Combined with its $2 billion pre-IPO investments in Snap, Tencent is currently the largest shareholder, with a 17.5% stake, according to Bloomberg data. That could make for a hefty profit — north of $500 million — if the firm decides to exit its Snap investment anytime soon.

Shares of Snap have soared 45% this week after the company reported blockbuster results on Wednesday, surpassing their initial public offering price for the first time since July.

Snap CEO Evan Spiegel is also seeing green this week. The 27-year-old founder owns just over 10% of the company, and has seen his net worth swell to $4.3 billion, up about $1.3 billion following the report.

Tencent might be bullish, but Wall Street remains skeptical of Snap’s future.

Analysts polled by Bloomberg have an average price target of $15.82 for the stock — 20% below where shares were trading Thursday afternoon.

“Snap reported good 4Q17 results vs. expectations, with revenues above forecasts,” Pivotal analyst Brian Weiser said in a note. “However, we did not hear any commentary nor observe any data which causes us to meaningfully alter longer-term variables in our model. Our price target remains $10 per share on a YE2018 basis, which continues to lead us to rate the stock Sell."

Jeffries analyst Brent Thill echoed Weiser’s concerns: “A good quarter doesn't change our fundamental view that Snap has its work cut out to continue to deserve a premium multiple,” he said.

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