Tencent buys 12% stake in Snap Inc amidst Snapchat revamp plans

Tencent Holdings has bought a 12% stake in Snap Inc, parent company of social media platform Snapchat. According to an FT report the stake is worth around US$2 billion. The move follows news reports of Snap Inc CEO Evan Spiegel unveiling revamp plans for Snapchat following feedback on the difficult usability of its interface, according to Reuters.

It also follows declining share performance, with shares dropping as much as 20% in after-hours trading. This was before paring losses to trade at US$12.57, the Reuters report added. The move followed a recent release of its third quarter results which also saw daily active users increasing from 173 million in Q2 2017 to 178 million in Q3 2017.

According to its latest third quarter results, Snap revealed a rise in sales and marketing costs from US$34,658 in 2016 to US$101,511 in 2017. The company also saw a rise in research and development costs from US$54,562 in 2016 to US$239,442 in 2017. This was for the three months ended 30 September 2017.

Snap recently confirmed that it had let go of 18 people in its recruiting division, according to a report by CNBC. The cuts made up less than 1% of the company’s total workforce, and follow around a dozen people cuts in its hardware marketing division. On top of the job cuts, Snap also unveiled plans to slow its recruitment in the next year, with the spokesperson adding that the move was a “logical” one seeing the high speed of growth the company is facing.

The investment into Snap Inc joins several Tencent has made over the past year. Just in March this year, Tencent bought 5% of Tesla’s shares for about US$1.7 billion, making it one of the electric car company’s biggest shareholders. It also bought a majority stake in China music-streaming company China Music Corp last year, along with an acquisition of 84% of Supercell, Finnish maker of “Clash of Clans”, from SoftBank with US$8.6 billion.