×
You will be redirected back to your article in seconds

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

  • Contract Placeholder Business WGA ATA Agent

    Signs of Solidarity and Strain Emerge as Week 2 of WGA-Talent Agency Standoff Begins

    Hundreds of WGA members rallied solidly behind their union last week as the industry grappled with uncertainties spurred by the sudden break between writers and their talent agency representatives. But as the standoff heads into its second week, signs of strain among some WGA members are beginning to emerge. Shalom Auslander, author and creator of [...]

  • Woodstock 50 Festival Postpones Ticket On-Sale

    Woodstock 50 Festival Postpones Ticket On-Sale Date

    UPDATED: The troubled Woodstock 50 festival has run into more difficulties, as multiple sources told Variety late Friday that the April 22 on-sale date for the event has been postponed. Agents for artists scheduled to perform at the festival — which include Jay-Z, Dead & Company, Chance the Rapper, Miley Cyrus, Imagine Dragons and Halsey [...]

  • National Enquirer - Jeff Bezos

    Hudson Media CEO James Cohen Purchases the National Enquirer

    Hudson Media’s CEO James Cohen announced Thursday that he will purchase the National Enquirer as well as American Media’s other tabloids, the Globe and the National Examiner. With the purchase of the National Enquirer, which Cohen reportedly bought for $100 million, he plans to strengthen their collaborative efforts, documentary shows, weekly podcasts, and theme parks. [...]

  • Amazon

    Amazon Music’s Free Tier Is More Advertising Play Than Spotify Killer, Analysts Say

    When news began to spread last week that Amazon Music’s long-anticipated free streaming tier was imminent, headlines emerged about its threat to Spotify and Apple Music, with some stories saying that Spotify’s stock price dropped in response to the news. But not only was today’s launch of the free tier basically a soft one — [...]

  • Nicki MinajCFDA Vogue Fashion Fund Dinner,

    Nicki Minaj Parts Ways With Longtime Managers (EXCLUSIVE)

    Nicki Minaj has parted ways with Gee Roberson and Cortez Bryant and Blueprint/ Maverick Management, a source close to the situation confirms to Variety. She had worked with the pair for the majority of her career. The source says the decision was mutual and amicable, and there was no specific reason for the split, adding [...]

  • Amazon

    Amazon Music Launches Free Streaming Tier, Through Alexa Only (for Now)

    Amazon Music today basically soft-launched its free streaming tier, in which U.S. customers of its Alexa voice assistant will have access to top Amazon Music playlists and thousands of stations, at no cost. The limited access that the new free service provides — it’s only available through Alexa, and when the listener requests a song, [...]

More From Our Brands

Access exclusive content