Tencent Holdings Limited : an IPO case study

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dc.contributor.advisorToerien, Francoisen_ZA
dc.contributor.advisorKruger, Ryanen_ZA
dc.contributor.authorDe Wet, Darioen_ZA
dc.date.accessioned2015-12-03T14:09:57Z
dc.date.available2015-12-03T14:09:57Z
dc.date.issued2015en_ZA
dc.description.abstractThe purpose of this case study is to empirically investigate the phenomenon of initial public offerings (IPOs) by applying it to Tencent Holdings Limited (Tencent). Tencent is a Chinese internet and telecommunications value-added service provider that launched its IPO on 16 June 2004. Tencent is China’s largest internet firm and Asia’s most valuable brand, boasting a current market capitalization of HK$1.224 trillion (US$157.9 billion). The origins of Tencent’s success story trace back to its IPO decision, an important topic in the field of finance. The aim of this study is to investigate the structure of Tencent’s IPO, its listing decision and determining an intrinsic value of its IPO shares on its listing date. It was found that Tencent’s IPO extensively relates to academic literature surrounding IPO under-pricing and valuing unlisted companies. The results reveal that Tencent left money on the table by underpricing its offer shares and exercised its over-allotment option as a form of price stabilization. It was further found that Tencent’s underpricing was not influenced by competitor IPOs but rather by stringent IPO allotment policies and other signals of firm quality. It was also discovered that there might have been bias in the allocation of Tencent’s shares. An investigation into Tencent’s listing on the Hong Kong Stock Exchange (HKEx) revealed that while its competitors listed on the NASDAQ Stock Market, there was a clear correlation between Tencent’s operations and corporate structure to the HKEx listing and regulatory requirements. The decisive factors included domiciling in the British Virgin Island and Cayman Islands, the cost of listing on the HKEx Main Board versus the NASDAQ National Market as well as the effects of US GAAP and the Sarbanes-Oxley Act of 2002. The study was concluded with the application of a relative valuation and discounted cash flow (DCF) valuation. The relative valuation estimated a price range of HK$14.40-HK$18.72 for Tencent’s IPO shares, while the DCF estimated the intrinsic value of the shares to be HK$18.68. The analysis was comprehensive and in-depth and suggests that Tencent’s IPO shares were five times undervalued and were offered to shareholders at a deep discount.en_ZA
dc.identifier.apacitationDe Wet, D. (2015). <i>Tencent Holdings Limited : an IPO case study</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,School of Management Studies. Retrieved from http://hdl.handle.net/11427/15538en_ZA
dc.identifier.chicagocitationDe Wet, Dario. <i>"Tencent Holdings Limited : an IPO case study."</i> Thesis., University of Cape Town ,Faculty of Commerce ,School of Management Studies, 2015. http://hdl.handle.net/11427/15538en_ZA
dc.identifier.citationDe Wet, D. 2015. Tencent Holdings Limited : an IPO case study. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - De Wet, Dario AB - The purpose of this case study is to empirically investigate the phenomenon of initial public offerings (IPOs) by applying it to Tencent Holdings Limited (Tencent). Tencent is a Chinese internet and telecommunications value-added service provider that launched its IPO on 16 June 2004. Tencent is China’s largest internet firm and Asia’s most valuable brand, boasting a current market capitalization of HK$1.224 trillion (US$157.9 billion). The origins of Tencent’s success story trace back to its IPO decision, an important topic in the field of finance. The aim of this study is to investigate the structure of Tencent’s IPO, its listing decision and determining an intrinsic value of its IPO shares on its listing date. It was found that Tencent’s IPO extensively relates to academic literature surrounding IPO under-pricing and valuing unlisted companies. The results reveal that Tencent left money on the table by underpricing its offer shares and exercised its over-allotment option as a form of price stabilization. It was further found that Tencent’s underpricing was not influenced by competitor IPOs but rather by stringent IPO allotment policies and other signals of firm quality. It was also discovered that there might have been bias in the allocation of Tencent’s shares. An investigation into Tencent’s listing on the Hong Kong Stock Exchange (HKEx) revealed that while its competitors listed on the NASDAQ Stock Market, there was a clear correlation between Tencent’s operations and corporate structure to the HKEx listing and regulatory requirements. The decisive factors included domiciling in the British Virgin Island and Cayman Islands, the cost of listing on the HKEx Main Board versus the NASDAQ National Market as well as the effects of US GAAP and the Sarbanes-Oxley Act of 2002. The study was concluded with the application of a relative valuation and discounted cash flow (DCF) valuation. The relative valuation estimated a price range of HK$14.40-HK$18.72 for Tencent’s IPO shares, while the DCF estimated the intrinsic value of the shares to be HK$18.68. The analysis was comprehensive and in-depth and suggests that Tencent’s IPO shares were five times undervalued and were offered to shareholders at a deep discount. DA - 2015 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2015 T1 - Tencent Holdings Limited : an IPO case study TI - Tencent Holdings Limited : an IPO case study UR - http://hdl.handle.net/11427/15538 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/15538
dc.identifier.vancouvercitationDe Wet D. Tencent Holdings Limited : an IPO case study. [Thesis]. University of Cape Town ,Faculty of Commerce ,School of Management Studies, 2015 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/15538en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentSchool of Management Studiesen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherBusiness Scienceen_ZA
dc.titleTencent Holdings Limited : an IPO case studyen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMBusScen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
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