Tencent is strengthening its hold on Snap with its latest move.
As owner of Chinese messaging giant WeChat, Tencent is a major force to be reckoned with.
Tencent was an investor in Snap way back when the company was still a start-up going by the name of Snapchat.
Now, it seems that the Chinese company is looking to further its involvement, as an SEC filing following Snap’s quarterly results saw that Tencent had acquired another 145,778,246 shares of Class A common stock in open-market trades.
The Snap filing read: “We have long been inspired by the creativity and entrepreneurial spirit of Tencent, and we are grateful to continue our longstanding and productive relationship that began over four years ago.”
Tencent participated in private funding rounds for Snap in 2012 and 2013. Considering Snap’s disappointing quarterly results, Tencent purchasing more shares comes as a much-needed vote of confidence for the company.
Tencent accumulating a financial stake
CNBC reported that Tencent notified Snap of the purchase this month. According to Reuters, Snap’s privately owned structure means that it is likely Tencent was simply accumulating a financial stake in the company.
Morningstar analyst Ali Mogharabi explained what the next steps could be: “The positive side of this could be that the two companies may create a business partnership of some kind, or Tencent may aid Snap in expanding its reach into China.”
Snap has declined to answer any more questions regarding this filing. In a statement, it said: “Tencent and Snap are not obligated to disclose changes in Tencent’s ownership of our Class A common stock, so there can be no assurance that you, or we, will be notified of any such changes.”
Snapchat app overdue an overhaul
Snap is making major efforts to court a larger audience.
CEO Evan Spiegel said that the app would be redesigned, after just 4.5m new users were added last quarter.
“There is a strong likelihood that the redesign of our application will be disruptive to our business in the short term, and we don’t yet know how the behaviour of our community will change when they begin to use our updated application.”
Snapchat app on mobile. Image: Chonlachai/Shutterstock