Tencent 'eyes Singapore' for WeChat spinoff

Tencent Holdings Ltd, China's biggest Internet company, is planning a spinoff of its popular messaging and social media app through a separate listing on the Singapore stock exchange.

Tencent has set up an office in Singapore to deal with WeChat's listing, a person close to the matter told China Daily.

The source didn't disclose the name of the new entity.

The popular app, known as Weixin, has more than 400 million users in its domestic market alone, according to the Ministry of Industry and Information Technology.

WeChat has been an "overnight success" for Pony Ma, chairman and chief executive officer of the Internet conglomerate, who hadn't even "prepared any explicit timetable for the listing or come up with a solid money-making plan for the popular instant messaging tool", the source said.

Tencent initially planned to list WeChat on the Hong Kong stock exchange, like the holding company that completed its initial public offering in June 2004.

The shares of that company closed at HK$367.40 ($47.37) on Monday, making them the most expensive shares in Hong Kong. At the time of the IPO, the shares were priced at HK$3.70.

Tencent abandoned the plan to list WeChat in Hong Kong as an "initial public offering of a spinoff on the same stock exchange with the holding company will raise more issues for Tencent", while a separate listing of WeChat in Singapore is "an apparently easier choice", said the source.

Tencent's heavy investment and recognition in the overseas market, especially in Southeast Asia, will also support its fundraising activities in Singapore.

Earlier this year, Louis Song, a Tencent regional manager for Malaysia and Singapore, said the company had been waging intensive campaigns to expand its presence in those markets.

Tencent President Lau Chi-ping said in July that overseas registered WeChat users had exceeded 70 million, up 75 percent from April.

With such an enormous user base, the profit model of WeChat remains a "mystery", according to the source. WeChat is still a "strategic product" for Tencent, like Tencent Weibo, which means the company doesn't expect to turn a profit at present.

But the earnings prospects are definitely rosy, said the source. Tencent released WeChat 5.0 earlier this month, which for the first time introduced games into the app.

One game, called Tian Tian Ai Xiao Chu, which must be downloaded separately from WeChat 5.0, was downloaded nearly 80 million times on the day of its debut.

Tencent's first-quarter profit rose 37.1 percent to 4.04 billion yuan ($660 million), fueled by robust growth in online gaming and advertising income, the company said in May.

"Say, if we only charge 1 yuan for downloading the game from WeChat in the future, it will bring us 80 million yuan from WeChat, in just one day," said the source.

WeChat's future versions will gradually introduce "money-making tools" for Tencent, but the company will be very discreet about these decisions, the source added.

Tencent will not hastily utilize WeChat to make money as it is not even an issue for such a cash-rich company, according to the source.

Following a maiden US-dollar bond transaction in December 2011 with a $600 million issue, on Aug 30, 2012, Tencent issued $600 million in 5.5-year unsecured notes. The net proceeds of $594 million were to be used for "general corporate purposes".

"Tencent's ultimate goal remains an initial public offering on NASDAQ and all these bond issue activities serve to test the reaction of global markets," said the source.

"But it appears the dual listing plan in the US has been put aside by Tencent at this moment, given the relatively stricter listing rules as well as concerns from regulators (there)," the source added.