Tencent, the China-based company that is owner of WeChat the Chinese equivalent to WhatsApp, was an investor in startup Snap, when the business was only known as Snapchat.
Now, as the stock price of Snap falls under pressure of slower than expected user growth as well as missed revenue results, Tencent is increasing its stake in the company.
In a SEC filing for quarterly results or a 10-Q, Snap made a disclosure that Tencent acquired over 145.7 million more shares of its common stock in trades in the open market, which equals just over 12% of the business.
This stock is non-voting, and means that Tencent will not receive much visibility from Snap if the shareholdings were to change in the future, as they do not have to be reported to federal regulatory agencies.
Snap and Tencent do not have an obligation to disclose the changes in ownership by Tencent of Class A common stock, therefore that is no assurance that anyone will be notified upon changes, wrote Snap in its filing.
It means the exact holdings of Tencent in Snap are not known, but both companies have been connected for quite some time with one another.
Tencent was involved in at least one of Snap’s funding rounds, which took place in 2013, at a time it had been reported the China-based company was interested in making an investment in another round, but further investment made by Tencent have not been confirmed.
At one time, Tencent was rumored to be a company interested in taking over Snapchat as a strategic part of its broader global ambitions, and in specific to expand into the market in the U.S.
It was once called a role model by Evan Spiegel the co-founder and CEO at Snap, a sentiment that was also echoed in its filing released on Wednesday.
Snap has fallen by 7% during trading before the opening bell Wednesday so, the impact of Tencent’s purchase of more shares might not be so impactful on helping to improve the price of shares, as it more likely will be looked at as a sign that a strategic and significant investor might be seizing upon an opportunity to acquire more stake in the business, during a time it remains a good deal.
It has been very difficult for Snapchat to increase its user base and its revenues for its messaging app, not only because of the vast amount of competition from the likes of WhatsApp, Messenger and Instagram, but from a host of other available apps.