Tencent backs China e-commerce service provider

Hedge funds managed by Franchise Capital and Elephas Investment also contributed capital. The investors will collectively purchase 1.7 billion newly issued shares at HK$0.53 apiece, a discount to the closing price of HK$0.64 on April 2. Shares climbed as high as HK$0.68 following the announcement on April 3, but dropped back to close at HK$0.65 on April 4.

Tencent’s portion of the deal is the largest. The internet giant will take 1.04 billion shares, a 6.7% stake, while Gaocheng and Greater Bay Area will have 0.76% and 0.41%, respectively. Franchise and Elephas will see their respective stakes rise to 2.1% and 2.7%.

China Youzan develops a range of software-as-a-service (SaaS) products for online and offline merchants that include third-party payments solutions, marketing, and customer engagement tools. It works with clients in a range of sectors, including online grocery, clothing, beauty care, and baby care.

For the year ended December 2018, China Youzan reported HK$684 million in revenue, up from HK$208 million the previous year. Over the same period, the company’s net loss grew from HK$135 million to HK$839 million, which it attributed to investments in new business lines and customer acquisition.

China Youzan will use the majority of the proceeds from the investment for marketing and advertising services, with the rest earmarked for working capital and technology upgrades.

Other investors in China Youzan include Matrix Partners, Hillhouse Capital, and Tembusu Partners. Following the Tencent investment, their stakes will fall to 2.5%, 4.5%, and 5.9% respectively.

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