Telsa stock blows up after Chinese tech company Tencent acquires 5% of its stake

Article by Christian A., on March 31, 2017

Chinese Tech Heavyweight Tencent Holdings Ltd. has secured a 5% asset from Tesla Inc., according to a report based on its U.S. regulatory filing. This move puts Tencent as one of the American company's largest investors at a time period when Tesla badly needs to increase its funds.

And Ford clearly has some catching up to do. Tencent, one of China's most profitable tech companies, dished out a whopping $1.8 billion for its share of 5% stakeout from Tesla. In return, Tencent acquired nearly 8.17 million worth of shares through a new Tesla stock offering at the open market. Per Bloomberg's report, the Chinese tech company's recently purchased stake makes it Tesla's 5th biggest shareholder to date.

Tencent took a passive stake which indicates that is highly unlikely to try to provide further tension to the electric automaker powerhouse to make any developments. In the aftermath of the press release, Tesla's stock expectedly surged from 3.42% to $279.39 per share in the early afternoon trading this Tuesday. Another detail worth mentioning is that the American automotive company is Zacks Rank #3.

Tencent is not that well-known beyond China - but don't let it fool you as this company is the world's biggest video game publisher based on revenue. Do you recognize the mobile games "League of Legends" and "Clash of Clans"? Tencent owns both massively popular video games. Not only that, Tencent also possesses 2 major Chinese social-media platforms powerhouses WeChat and Weixin, which has a large following of over -wait for it- 890 million active users combined! In the earlier part of this year, Tencent's stock price was at an estimated $4.41/share. Now Tencent's stock shot up to 1.75% or $29.49 per share.

Tencent's market cap is around a shocking $276.6 billion and has taken over Chinese e-commerce giant Alibaba Group Holding Ltd. which boasts a market cap of an estimated $269.7 billion. The major Tencent investment arrived in time as Tesla continues to move forward with the release of its first mass-market car, the Model 3, in the year 2017.

The Elon Musk-led company is devising a plan to go into the manufacturing of its economical electric vehicle by summer 2017 in hopes of fulfilling the 373,000 pre-orders of the Model 3 sedan which has a $35,000 price tag. Tesla is racing against time to be able to raise a large amount of money for them to produce the fresh electric sedans, and thanks to Tencent's nick of time investment, this may be the start of Tesla and Tencent's promising long partnership.

The automotive manufacturer has over $2 billion worth of debt due in 2018. However it doesn't seem to affect Tesla's performance as its stock price has risen 26% in 2017, and has reached a market cap of over $45.5 billion. Currently, Tesla is considered the 2nd most profitable U.S. auto company with Ford trailing behind. Tesla is also marking its presence in China, in which China imported 11,839 vehicles in 2016, 5 times more than the past year.

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