Meituan is one of China’s largest food delivery companies. Delivery drivers can be seen zipping around Chinese cities. Tencent first backed rival Dianping in 2014, which merged with Meituan to form the current company.
Jade Gao | AFP | Getty Images
Shares of Chinese food delivery giant Meituan fell 9% on Tuesday after Reuters Tencent plans to sell the majority of its $24 billion stake in the company.
Tencent, which owns 17% of Meituan, plans to appease domestic regulators and cash in on its eight-year-old investment, Reuters reported, citing four sources with knowledge of the matter.
A Tencent spokesperson said it “does not comment on market speculation” when contacted by CNBC. Meituan was not immediately available for comment.
Shares of Tencent closed up 0.8% in Hong Kong.
Tencent, which owns China’s No.1 messaging app WeChat, plans to start selling shares this year if market conditions are favorable, Reuters reported.
A source with knowledge of the matter told CNBC that there were no plans for Tencent to sell its stake in Meituan.
Tencent invested in a company called Dianping in 2014 which then merged with Meituan a year later to form the current entity.
Investments by Chinese tech companies have come under scrutiny amid Beijing’s sweeping crackdown on the country’s giants. Chinese authorities have sought to curb the power of tech giants through tougher regulation in areas ranging from antitrust to data protection.
Reuters reported that part of Tencent’s reasoning behind divesting Meituan’s stake satisfies regulators worried that tech giants are backing companies closely tied to people’s livelihoods.
Over the past few months, Tencent has divested stakes in some of its biggest investments.
In December, Tencent announced it would divest most of its stake in China’s second-largest e-commerce player, JD.com.
In January, Tencent raised $3 billion from the sale of some of its shares in Singapore-based gaming and e-commerce company Sea.
Tencent’s share sales come at a time of slowing growth for the Chinese tech giant, which has been hit by a slowdown in the world’s second-largest economy and tighter regulations in the domestic gaming sector. Tencent is the largest game company in China.