According to a Securities and Exchange Commission filing from Snap, the company said Tencent has purchased 145.8 million non-voting shares during the last quarter, which ended in September, giving it a 10% stake. Tencent had previously invested in Snap back in 2012 and then again in 2013.
The disclosure of the stake purchase by the leading Internet player in China may serve to calm investors who sent shares plummeting in after-hours action Tuesday after the company reported disappointing results for its third quarter, marking the third straight three month period in which Snap weighed in with lackluster results. For Tencent to still support the struggling company, it could result in some investors staying put. The stock was trading 11% lower in pre-market trading after plunging nearly 20 percent on Tuesday.
For the period ended September, the company reported revenue of $208 million, way lower than the $237 million Wall Street was looking for. It also reported a net loss of $443 million for the quarter, although it beat on the EPS side by a penny. The company said it added 4.5 million new users, much lower than the close to 8 million Wall Street was expecting. The social media player ended the quarter with 178 million total daily users. (See more: China Will Overtake the U.S. in AI: Alphabet Chairman.)
Since its IPO in March, the company’s stock has been under pressure, trading for months now below its IPO price of $17 a share. While there were high hopes that Snap would become a $1 billion business this year, a lack of growth is hurting those plans and thus the stock price. (See more: Facebook’s TBH Buy Is a Bet Against Snap: Cramer.)
One of the major problems Snap has been having is luring advertisers to a platform they don’t fully understand. After urging investors to be patient as advertisers figure out how to use the disappearing messaging app, Snap’s Chief Executive and co-founder Evan Spiegel revealed during the company’s third-quarter earnings report that it is overhauling the app to make it more appealing to the masses, not just the young, tech-savvy set. The executive did warn that the overhaul of the app will hurt the business in the short term and that it's not clear how it will be received by its core base of users. “We’re willing to take that risk for what we believe are substantial long-term benefits to our business,” Spiegel said, according to the Los Angeles Times.