China’s Tencent buys minority stake in developer of Snapchat

Tencent Holdings, China’s biggest instant messaging company, bought 145.8 million non-voting shares in Snap, saying it plans to work closely with the social media company.

In a Securities and Exchange Commission filing Wednesday, the Snapchat developer said Tencent bought the shares on the open market. CNBC earlier reported the stake to represent 10 per cent of the company.

Shares in Snap rose as much as 34 per cent in pre-market trading on the news in New York but then retreated.

Snap is getting a valuable ally in China, where its disappearing message app doesn’t work amid government restrictions. Tencent operates two separate instant messaging services, WeChat and QQ, with close to a billion users each. The Shenzhen-based company has turned them into full social networks and made money by adding games, newsfeeds and advertising.

Tencent’s purchase is not seen as a hostile move, according to a person familiar with the transaction. Snap CEO and co-founder Evan Spiegel sees it as an opportunity to learn from the Chinese company, the person added, asking not to be identified discussing a private matter.

Tencent president Martin Lau said the company plans to share “ideas and experiences” with Snap, according to the filing.

Tencent, which has a market value of about US$470 billion, has been diversifying its business into advertising and finance. It’s also one of China’s more acquisitive companies and is throwing its weight behind Snap after making investments in fields from games to satellites and asteroid-mining.