China’s technology and entertainment giant, Tencent Holdings Limited, announced on December 1 that it has just repurchased 36,200 shares or over HK$10.6 million ($1.3 million—US$1 = HK$7.789). This is the lowest share repurchase so far, worrying the market.
Tencent’s single-day repurchase of at least HK$200 million ($26 million) has become a norm. Sometimes, the company repurchased shares with a value of more than HK$300 million ($38 million).
Tencent is called “Tengxun” in China. The company’s repurchase initiative was once jokingly called “Teng 300 million,” indicating the normal level of its repurchase program.
However, on December 1, its single-day repurchase amount was only a HK$10 million level, the lowest. It showed the sensitive and unusual period regarding both the amount and the number of repurchases.
Many investors are worried and asked whether Tencent did not have enough money to buy shares back.
According to a Chinese brokerage reporter, Tencent’s repurchase suddenly shrunk because the repurchase price cannot be higher than 5% of the average price of the past five trading days. It was not due to financial reasons nor the new repurchase restrictions of the Hong Kong stock exchange.
Tencent shares recently rebounded, so there was an insufficient number of shares to meet the repurchase price.
On December 1, Tencent Holdings closed at HK$294.4 a share, meaning that its share price had rebounded by 47.2% from almost HK$200/share on October 28, with an average price of HK$279.28/share for the last 5 trading days.
The price range for this buyback of shares is set at HK$292.6 – HK$293.2; that is, the number of shares that can meet the repurchase is limited, which led to a significant drop in the amount of Tencent’s single-day repurchase.Market confidence reversed the following day, December 2, as Tencent announced a repurchase of 1.19 million shares worth HK$351 million.