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CHINA’S TENCENT NOW OWNS MORE THAN 10 PERCENT OF SNAP

Snap’s shares are getting snapped up by Tencent, one of China’s biggest tech and investment firms.

The owner of video-messaging app Snapchat disclosed Tencent’s growing ownership stake in a regulatory filing late Tuesday. The Chinese firm has acquired 145.8 million shares of its non-voting Class A common stock through purchases on the open market, or more than 10 percent of its outstanding shares. The buying spree follows earlier reports that Tencent had acquired stock in the company.

Snap CEO and co-founder Evan Spiegel reportedly is viewing the stake as an opportunity to learn from Tencent, which operates the instant messaging services WeChat and QQ in China, and not as a hostile move. The stake comes as Snap is struggling with growing pains, yesterday reporting a wider third-quarter loss, revenue that was lower than analysts’ expectations and lackluster Snapchat user growth.

“Decelerating growth trends, fierce competition for user mindshare and advertiser dollars, and a history of being hugely unprofitable keep us on the sidelines,” said Wedbush analyst Michael Pachter in a research note after Snap released its earnings. “Snap remains clearly behind its competition” such as Instagram, owned by Facebook.

Snap said it plans to redesign the service to appeal to a wider audience beyond its core base of 13- to 34-year-olds in the U.S., France, the U.K. and Australia. This, Spiegel said in Tuesday statement, includes Android users, people older than 34, and what he called “rest of world” markets.

On a conference call, Spiegel said the redesign could be “disruptive” to its business. “We don’t yet know how the behavior of our community will change when they begin to use our updated application,” he said. “We’re willing to take that risk for what we believe are substantial long-term benefits to our business.”

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