Tencent raises stake in Snapchat

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China's tech giant Tencent, a social networking and entertainment behemoth, increased its ownership in Snapchat to 12 percent, becoming one of the largest stakeholders in its parent company,

The news, which was delivered in a quarterly earnings report - which investors found less than palatable - was a strong shot in the arm for the California-based company, turning over a 20 percent slide, recovering to trade down just 2 percent at 14.80 US dollars in premarket trading from a close of 15.12 US dollars on Tuesday.

This would not be the first time Tencent, an increasingly active investment firm, and among the world’s biggest video game developers, would be backing Snapchat, which celebrated one of the hottest tech stock debut in years in March.

Media reported in late 2012 and 2013 that Tencent had bought shares in Snapchat through a series of private rounds, while an additional deal failed to materialize in 2014.

Snap said in its quarterly report on Wednesday that Tencent had bought 145.8 million shares of its non-voting Class A common stock on the open market.

"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,"stated Snap Inc.'s filing on Wednesday.

Shareholders of Snap’s Class A share have no voting rights and 95 percent of the company’s voting power rests with co-founders Evan Spiegel and Bobby Murphy. Snap's reported revenue and user growth for the third quarter came in well below Wall Street expectations as it struggles to compete with Facebook Inc’s Instagram.

User growth in the last three months was well below what investment analysts expected. Daily active users rose to 178 million in the third quarter from 173 million in the second quarter. Analysts had expected 181.8 million, according to research firm FactSet.

Chief Executive Evan Spiegel said the company was launching the redesign after hearing for years that Snapchat was difficult to understand or hard to use.

“We are going to make it easier to discover the vast quantity of content on our platform that goes undiscovered or unseen every day,” Spiegel told analysts on a conference call.

The 27-year-old CEO said there was a “strong likelihood” the redesign would be disruptive in the short term, but said Snap was willing to take the risk for long-term gain.

Source(s): Reuters