Tencent to take Nasdaq-listed video game streaming site Douyu private

Tencent is seeking to take game-focused livestreaming platform Douyu private, Reuters reported on Thursday. The move comes at a time when Tencent faces increasingly stringent and shifting regulatory conditions as the government defines the operational boundaries for major tech companies.

Douyu is listed on the Nasdaq and is China’s second largest site of its kind, after Huya. Tencent holds roughly 37% of Douyu’s shares and aims to complete the deal this year, according to Reuters’ report. Tencent is also Huya’s biggest shareholder, with roughly a 36.9% stake.

Douyu’s business performance went into steep decline in Q3 2021 and lost ground to Huya. In Douyu’s latest earnings report, the company’s revenue and profit both dropped and dragged the company into the red, while Huya posted stable growth in revenue and monthly active users.

Tencent had previously attempted to build a juggernaut streaming business by merging Douyu and Huya, but the deal was called off in July 2021 after it was blocked by regulators.

Douyu’s share price has dived by more than 60% since July 2021, suggesting that Tencent may be planning to take advantage of the low point to deregister Douyu from the Nasdaq.

In a changing operational environment where all tech firms have lost some momentum, Tencent posted 13% revenue growth for Q3 2021, the slowest since the company went public in 2004. In that period, its domestic video game business grew by a mere 5%.

The rules for investments made by tech companies in China may be changing. Earlier this month, ByteDance dissolved its investment arm, reportedly due to new requirements for businesses with more than 100 million users or annual revenue exceeding RMB 10 billion (USD 1.57 billion) to undergo approval with the Cyberspace Administration of China before notices of investments and acquisitions are submitted to China’s market regulator.

Tencent has exited some of its investments in the past two months. In December, the company trimmed its holdings in JD.com and distributed the shares to employees, shedding its status as the largest shareholder of JD.com. This month, Tencent cut its stake in Singapore-based Sea Group, offloading shares worth USD 3 billion. The company said it was redirecting these resources to fund other investments and social initiatives.