14 DAY TRIAL // Tencent Holdings, one of the largest tech companies in China, announced the purchase of a 5% stake in Tesla, for which it paid $1.78 billion.
The information was featured in a document filed with the US Securities and Exchange Commission (SEC) and comes just days after Tesla announced it was looking into raising more funds to scale its business and to bring to the market its new car, the Model 3.
Tesla said, at the time, that it expected to secure over $1 billion by selling common stock and senior notes, money which they'd use to line up the balance sheet, while also reducing any risks associated with the rapid scaling of its business following the launch of Model 3. This new Tesla car would be the cheapest model they sold thus far, going for $35,000, which is reason enough for the company to expect a rapid growth in sales.
Plenty of funds to cover the acquisition
Tencent now holds just under 8.17 million shares, and it is Tesla's fifth-largest shareholder. The move makes sense, especially since China is a popular market for Tesla's cars. Sales in China accounted for over 15 percent of the company's total revenue in 2016. Given the high pollution levels in the country, this, once more, is a natural inclination towards green cars.
Tencent's 2016 earnings report proved the company was on a well-established path to success. Tencent's 2016 revenue hit $21.9 billion, a whopping 48% increase over the previous year, while the operating profit hit $8,09 billion.
Back in December, Tencent announced another interesting move by acquiring a 10% share in Here, a local mapping company that also offers services for autonomous vehicles. Back in 2014, the company also bought an 11% stake in NavInfo, another mapping company based in Beijing.