Tencent completed its full 9.6 percent exit from Bilibili through a USD700 million zero-coupon convertible-bond issuance and USD300 million buyback, a structure Daiwa and JPMorgan say removes the share overhang while Nomura stays Neutral. Net dilution is about 3.5 percent and Bilibili keeps roughly USD400 million in working capital.
Tencent Holdings completed the disposal of its entire 9.6 percent stake in Bilibili through a coordinated convertible-bond and buyback package, a structure analysts said removes the share-supply overhang that has weighed on the video platform's stock. The transaction pairs a USD700 million zero-coupon note sale with a USD300 million repurchase, leaving net dilution near 3.5 percent.
"The move eliminated Tencent's long-standing monetization pressure while bringing USD400 million in new capital and limiting equity dilution," Daiwa analyst analysts wrote in a note, reiterating a Buy rating on Bilibili. The broker called the structure a "three-win" outcome for the company, its shareholders and Tencent.
Bilibili issued USD700 million of zero-coupon convertible senior notes maturing Sept. 15, 2031, with USD500 million placed to public investors and USD200 million subscribed by Tencent at a conversion price of HK$155.79, a 28.3 percent premium to the Sept. 4 close. Tencent, which held about 40 million Class Z shares and American depositary shares representing 9.6 percent of issued shares, sold roughly USD400 million through a secondary placement while Bilibili repurchased about USD200 million of its holdings and an extra USD100 million of borrowed shares. The company expects net proceeds of about USD400 million for working capital, while Tencent books roughly USD400 million in cash to help fund an AI build-out projected at RMB122 billion in second-half capital expenditure.
The deal's main drawback is potential future dilution, though conversion would only become economically attractive after a sharp share gain, and Tencent can monetize the notes over the counter rather than selling stock directly, reducing future pressure on the underlying shares. JPMorgan cut its Bilibili target to HK$170 but reiterated Overweight, citing the removed placement overhang and an approaching new game cycle, while Nomura kept a Neutral rating and USD18 target, arguing advertising growth is slowing and the gaming outlook for the second half is weak. Bilibili shares rose 0.4 percent in Hong Kong trading, with short interest at 25.6 percent of turnover.
The transaction hands Bilibili low-cost funding at a coupon below ordinary offshore bonds just as it turns profitable, with second-quarter net profit up 55 percent year on year to RMB339 million. Investors will watch the extraordinary general meeting, where a circular is expected by Sept. 25, for approval of the off-market repurchase involving Tencent, and the launch of the new game pipeline that analysts say could drive a re-rating into 2027.
This article is for informational purposes only and does not constitute investment advice.
