China’s Tencent Holdings (OTC:TCEHY) has announced it will take a 5% stake in Tesla Inc. (NASDAQ:TSLA), spending $1.7 billion U.S. for its position in the electric carmaker.
Tencent might be the biggest tech company you’ve never heard of, since the clear majority of its operations are in China. Its largest products are instant messaging services like QQ and WeChat, which combine to have more than 1.5 billion unique monthly users.
The company also owns Tenpay, which is a leading online payment platform in China. It owns a gaming company, an online book store, a music platform, and much more. It also connects users to other goods and services, earning a commission on every sale.
In 2016, the company grew revenue to RMB152 billion, a 48% increase versus 2015. Operating profit was RMB58 billion and net profit was RMB45 billion. This translates into profits of approximately $6.5 billion U.S. Tencent has a market capitalization of about $275 billion U.S.
Analysts suspect the deal is more than just an investment. Tesla will likely benefit from Tencent’s ability to market its cars to millions of affluent Chinese users.
Tesla CEO Elon Musk hinted towards that, noting in a tweet that the company had "very few" orders for its Model 3 from China. He also indicated in a separate tweet that Tencent will be both an investor and an adviser to Tesla. The two companies could work together on new projects.
Tesla investors cheered the news, sending shares nearly 3% higher to $277.45 during Tuesday’s trading. Shares are just under their 52-week high of $287.39.
