Tencent buys 12 per cent stake in Snap

The Chinese internet company Tencent has acquired a 12 per cent stake in Snap, with the social media company struggling to boost user growth.

Tencent runs the WeChat messaging app, as well as online payment platforms and games. Earlier this year, it bought a 5 per cent stake in Tesla Inc.

Snap Inc. is the parent company of Snapchat, a camera app that lets people send short videos and images. The company, based in Venice, California, said in a regulatory filing Wednesday that Tencent bought 145.8 million shares.

Snap revealed Tuesday that its loss tripled to $443.2 million during the third quarter on weak user growth and revenue. The app is getting a redesign to make it easier to use.

Snap faces intense competition from Apple, Facebook’s Instagram and WhatsApp, and Google’s YouTube.

News that Tencent has become one of the company’s biggest investors did not staunch a sell-off Wednesday. Shares of Snap tumbled almost 15 per cent to $12.91, with a number of industry analysts downgrading the company.

UBS, among those advising clients to sell shares in the company, believes it will be exceedingly difficult for Snap to differentiate itself from industry giants like Google, Facebook and Amazon.

“In the first two quarters as a public company, we framed Snap’s disappointing results as ‘growing pains’ but felt the long-term debates around user growth and ad business scaling were left unsolved,” wrote analyst Eric Sheridan. “While many of those questions remain unanswered after a third earnings report, it is now very likely that Snap will continue to struggle on multiple fronts in the coming 12 months.”

It’s been a busy week in cross Pacific deal making.

With President Donald Trump meeting in China with President Xi Jinping for the first time, U.S. and Chinese companies signed deals valued at around $9 billion.