TESLA / TECENT: 1 DOUBLE WINNING OPERATION

Electric vehicle , Smart car , Air pollution and reduce greenhouse gas emissions concept. Double exposure of charging Electric car with power cable supply plugged in and city night light view.

The Chinese giant, which weighs 2.15 billion dollars on the stock market, paid 1.7 billion dollars to buy 5% of the Elon Musk company. This transaction was more than beneficial for the group as Tencent’s share price immediately increased by $4. Tesla’s share price also rose, giving Tencent an immediate capital gain of nearly $500 million, which is closely involved in autonomous cars. Tesla is opening up to the Chinese market.

The Asian giant made the deal a reality by buying 81 million shares of Tesla worth 217.7 dollars each. In the weeks following this transaction on March 17, shares rose 26.5% to $278.3 in value following another 3% increase, giving Tencent about $500 million in value added. The conglomerate thus consolidates its status as the company’s fifth largest shareholder with an estimated $2.28 billion stake in the company

A strategy that benefits both companies ?

It must be said that the two groups have converging interests: while Tesla will launch, in 2018, its first consumer car, the Tesla Model 3 which should cost $35,000 excluding environmental bonus, the Elon Musk group is interested in China, a market with strong growth potential.

For David Chao, co-founder of venture capital firm DCM, explains that Tesla could, for example, create public pages and communities on the WeChat social network with the help of its Chinese partner to better launch its products. For other analysts, this operation will allow Tesla to better launch the Model 3 in China.
Tencent, on the other hand, is strongly interested in the autonomous car and all the systems that revolve around this concept. The conglomerate has already begun its investment process in companies such as Didi Chuxing, the Chinese Uber or Here by the Finnish Nokia, the competing mapping service of
Google Maps. Becoming a major shareholder of Tesla should allow Tencent to move closer to its goal.

Sources:

http://www.clubic.com/pro/entreprises/actualite-827744-chinois-tencent-prend-5-tesla.html

http://www.numerama.com/business/244501-tesla-vend-5-de-son-capital-au-geant-chinois-tencent-pour-mieux-conquerir-la-chine.html

 

Kingsley Nwankwo

Kingsley NWANKWO


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