TENCENT HOLDINGS ADR (TCEHY), Baidu, Inc. (NASDAQ:BIDU) – China’s Antitrust Regulator Penalizes Tencent, Baidu For Previous Investments: Bloomberg
The antitrust agency in China has fined some of its tech majors, including Tencent Holdings Ltd. (OTC: TCEHY), Baidu Inc. (NASDAQ: BIDU), ByteDance Ltd and Didi Chuxing for previous acquisitions and investments as they tightened their tech confinement, Bloomberg reports, citing a statement from the regulator.
What happened: Pony Ma’s Tencent was fined $ 77,000 (500,000 yuan) for investing in the online education app Yuanfudao in 2018. Baidu was fined the same for acquiring consumer electronics maker Ainemo Inc. in 2014. The companies were reprimanded for failing to obtain prior permits in violation of the country’s antimonopoly laws.
Tencent and Baidu join the companion Alibaba Group Holding Ltd. (NYSE: BABA) when Beijing stepped up its tech industry surveillance efforts. The regulator fined Alibaba and Tencent Unit China Literature Ltd. last year. imposed for similar violations.
Ride-hail company Didi Chuxing unit Didi Mobility Pte and Japan SoftBank Group Corp. (OTC: SFTBF) (OTC: SFTBY) fines of 500,000 yuan each were imposed. This is the maximum possible penalty for starting a joint venture without permission.
A ByteDance unit and its partner Shanghai Dongfang Newspaper Co were also fined the same amounts for a 2019 partnership that created a video copyright company. ByteDance’s joint venture has reportedly been discontinued.
Tech companies like Tencent had previously made acquisitions through floating rate corporate structures that operate for shaky legal reasons and were overlooked under the new antitrust rules.
Why it matters: The exam and the penalty could have a significant impact on Tencent’s ability to strengthen its domestic ecosystem through mergers and acquisitions, as approval was not obtained for its investment in online education platform Yuanfudao in 2018. Although the size of the penalty is irrelevant for Tencent, the retroactive application of new anti-competitive rules announced in November could be a possible damper on its ambitions.
Other companies that were penalized in the last round are TAL educational group (NYSE: TAL) and Intime Retail Group Co.
Price action: TCEHY shares fell 7.76% to $ 82.35 and the BIDU fell 3.96% to $ 261.67 on Friday’s last check.
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