Tencent’s Worst Investment Has Been Its Own Shares

(Bloomberg Opinion) -- Catching a falling knife.

That’s how I’d describe Tencent Holdings Ltd.’s strategy to buy back its own shares over the past six weeks. The adventure started off on Sept. 7 with a minor purchase of 22,700 shares at HK$311.50 apiece. By Thursday morning the stock was down 4 percent, 8 percent, 15 percent.

That’s not the worst part. Tencent’s first repurchase in four years got even more expensive, with management buying shares for as much as HK$329.60 apiece just two weeks ago. The stock is down almost 20 percent from that level.

Tencent’s Worst Investment Has Been Its Own Shares

By Wednesday, just 33 days after that initial purchase, Tencent had shelled out HK$807 million ($103 million) for 2.56 million shares. That’s an average of HK$315.49 per share. And more often than not, the company lost money by the close of that day’s trading.

So far this year, Tencent has bought shares in a range of companies — from a location-based services provider to a grocery-deliveries startup — yet getting a return on its own stock has turned out to be a loser from the start.

To be sure, buybacks aren’t designed to make money from your own stock; they’re supposed to support the share price and signal confidence, a strategy that’s failed so far. 

With shares trading as low as HK$265 Thursday morning, Tencent’s dabble in it own stock had lost it 16 percent in less than six weeks.

Annualized, that’s a loss of 85 percent.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

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