×

Tencent Raises $6 Billion as Chinese Media Firms Storm Global Bond Markets

Chinese social media giant Tencent announced Thursday that it had raised $6 billion in a bond market issue. The issue is the biggest this year in Asia.

Tencent’s move came only hours after Chinese streaming film Bilibili raised $824 million from a convertible bond and share sale in New York. And it followed just days after the larger and more generalist streaming firm iQIYI raised $1.05 billion from a convertible bond sale, also in New York.

The moves reflect the confluence of several favorable factors in the finance markets and the return to investor favor of Chinese tech firms. The most significant reason appears to be that the U.S. Federal Reserve has indicated that it is not planning further interest rate increases in 2019. That makes corporate debt more attractive in comparison. Tencent’s $2 billion of bonds with 5-year maturity will pay a coupon of 3.28%, while its $500 million of 30-year bonds will pay out at 4.525%.

Several Chinese tech and media companies have listed their shares in the past two years. In addition to Bilibili and iQIYI , which both conducted IPOs in March 2018, the list includes phone maker Xiaomi, video group Pinduoduo, Tencent Literature, Tencent Music, and ticketing firm Maoyan. Last year’s weak equity markets meant that some companies were not able to raise as much fresh capital from their IPOs as they hoped. The convertible bond issues can make up for those shortfalls.

Bonds which are convertible into equity at pre-determined prices are the equivalent of issuing shares at a premium. In the short term they are cheaper for issuers and allow loss-making tech companies, which do not have sufficient cash flow, to access debt markets. Both iQIYI and Bilibili are in the red, but are seen as growth prospects. iQIYI priced its latest bonds at just 2%.

Investor sentiment towards Chinese companies has improved as the Chinese government has indulged in a huge spending spree to stave off a sharp economic slowdown, and as the U.S.-China trade war appears to be nearing a conclusion. Those factors have lifted shares in the hugely profitable tech giants Alibaba and Tencent. New York-traded Alibaba is up 36% so far this year, more than double the S&P 500 index. Tencent is up 18% since the beginning of January, managing to beat the 16% overall gain in Hong Kong’s Hang Seng Index, of which it is a major component.

Despite a final quarter of 2018 profits drop, Tencent shares have staged a spectacular recovery. They are up 48% since October, when its regulatory problems in the games sector seemed to be at their worst. With games approvals now again flowing, the media, tech and streaming giant looks to be on a more solid footing.

That more positive outlook may even be rubbing off on its competitors. While iQIYI’s ADR shares have yet to return to the highs of June 2018, at $23.98 apiece, they remain comfortably ahead of their $18 IPO price. And iQIYI’s latest bond issue is significantly cheaper than its first post-IPO try at the debt market. In November last year iQIYI sold $750 million of convertible bonds with an indicated yield of 3.75%.

At current prices Alibaba has a market capitalization of $462 billion, and Tencent $456 billion (HK$3.58 trillion). Post-merger Disney is currently valued at $202 billion.

More Biz

  • Photo taken July 18, 2019, from

    More Than 20 Feared Dead in Arson Attack on Japan's Kyoto Animation

    UPDATED: More than 20 people are feared to have died Thursday in an arson attack on the Kyoto Animation company in Japan, shocking a nation in which extreme violence is very rare. Emergency services in Kyoto City received a call about 10:35 a.m. local time Thursday reporting an explosion on the first floor of the [...]

  • Haim Saban

    Haim Saban Pledges to Invest $500 Million to Launch Music Label

    Businessman, investor and philanthropist Haim Saban, who heads the Saban Capital Group, has pledged to invest $500 million to launch a record label. Saban Music Group (SMG) will be led by music executive Gustavo Lopez and focus on “international A&R, artist development and strategically supporting a 360 model for artists,” reads a release announcing SMG, [...]

  • Street scene Sunset Boulevard at night

    In Los Angeles, Rock and Roll Fights to Save the Sunset Strip

    On a recent Saturday evening on Sunset Boulevard, just beyond the nightly caravan of European sports cars and open-air tour buses that have seen better days, the famous Tower Records building was once again bathed in the familiar red and yellow paint job of the iconic music store that once occupied its stone-brick walls. Though [...]

  • Plume of black smoke rising from

    Universal Music Files Motion to Dismiss Lawsuit From Artists Claiming Fire Damage

    Universal Music Group filed a motion on Wednesday to dismiss a class-action lawsuit from attorneys representing Soundgarden, Hole, Steve Earle and the estates of Tupac and Tom Petty over master recordings reportedly destroyed in a 2008 fire, the extent of which was revealed last month in a New York Times article. UMG argues that the musicians cannot pursue a [...]

  • After Yet Another Rejection, What Could

    After Yet Another Rejection, What Could Be Next for Woodstock 50?

    In the wake of the Town of Vernon’s third rejection of Woodstock 50’s permit application to hold its music festival at a venue in the Upstate New York municipality, one may well wonder what the troubled event’s next move might be. In the hours after the latest rejection was announced, even the optimistic-bordering-on-unrealistic producers sounded [...]

  • US actor Kevin Spacey (C) is

    Kevin Spacey Sexual Assault Case Dropped in Nantucket

    Nantucket prosecutors have dropped a sexual assault case against actor Kevin Spacey, citing the “unavailability” of the complaining witness. Spacey had been accused of groping an 18-year-old busboy at the Club Car restaurant in July 2016. He was charged with indecent sexual assault, and a trial was set to be held in the fall. However, [...]

  • Plume of black smoke rising from

    Universal Music Updates Staff on Fire Damage in Internal Memo (Read)

    Ahead of an expected motion to dismiss the lawsuit filed last month by several artists over damage in the 2008 fire that destroyed hundreds of thousands of master recordings, according to the New York Times, the company’s chief archivist, Pat Kraus, issued a memo to the staff that has been obtained by Variety. While the [...]

More From Our Brands

Access exclusive content