The surprise move — marking the first-ever half-year dividend by Tencent — pushed up its shares 4.9% in morning trading on Thursday. JD.com shares, however, tumbled as much as 11%.
The move comes as Beijing has been acting to curb the market dominance of Tencent, rival Alibaba Group Holding and other top internet platforms, as well as to force them to remove barriers that stop users from easily using competing services.
The drive has slammed their share prices, with Tencent sinking 43% in market value through Wednesday since reaching an all-time high in February.
Tencent, which has been a minor direct player in online retail, had chipped away at Alibaba’s overwhelming market share in e-commerce in recent years by backing both JD.com and Pinduoduo.
Tencent said that its board had resolved on Thursday to distribute one JD.com share for every 21 of its own shares stockholders possess as of Jan 25. Based on Wednesday’s closing price, the interim dividend is equivalent to 13.30 Hong Kong dollars (US$1.71) per Tencent share.
By giving out 457.33 million JD.com shares, Tencent’s stake will dwindle to 2.3% from 17% and the retailer will no longer be listed as an associate on Tencent’s books.
In explaining the move, Tencent referenced its investment strategy and JD.com’s development toward self-sufficiency.
“The board believes that JD.com has now reached such a status, and the board therefore considers that it is an appropriate time to transfer the majority of the interest held,” the company said, calling the dividend “a situation-specific action based on current considerations”.
In conjunction with the move, Tencent President Martin Lau resigned from the board of JD.com, where he had been a director since 2014.
The two companies, however, insisted they will remain close allies. Richard Liu, JD.com chairman and chief executive, highlighted “the close and trusted strategic partnership we have formed with Tencent to create more compelling value for our shareholders and society”.
Analyst Thomas Chong of Jefferies — which has a “buy” rating on both — wrote in a note to its clients: “The two companies will maintain their mutually beneficial business relationships, including the ongoing strategic partnership agreement.”
Tencent had US$26.8 billion of cash and equivalents on hand as of Sept 30. Its dividend will be distributed on March 25, with those holding less than 21 shares to receive cash.