Tencent divests 14% stake in British challenger bank Tide

In a strategic move that signals a shift in its global investment strategy, Chinese tech behemoth Tencent has divested its 14% stake in the British challenger bank Tide. This sale is part of a broader retreat from international investments, reflecting a cautious approach by Tencent in light of changing market dynamics and regulatory pressures.

Tencent, the owner of the widely-used Chinese super-app WeChat, has been an active investor in fintech and tech startups worldwide, including prominent UK fintechs like Monzo and Previse. However, the pace of its investments has slowed considerably in recent months. This trend is exemplified by the recent reduction of its stake in Tide to zero, as disclosed in a company filing from April.

The buyer or buyers of Tencent's Tide shares remain undisclosed, though the sale coincided with a secondary share offering earlier this year, which allowed early investors in Tide to cash out. Such transactions are becoming increasingly common as tech startups delay going public, preferring to stay private for longer periods. For instance, Revolut, Europe’s most valuable fintech, recently permitted its employees to sell shares at a valuation of $45 billion (£35 billion).

Founded in 2015, Tide has established itself as a leading provider of business accounts and financial services for small and medium enterprises (SMEs) across the UK, India, and Germany. With a customer base of 575,000 SMEs and a workforce of 1,600 employees, Tide has grown significantly under the leadership of Sir Donald Brydon, the company's chairman. The firm has attracted significant investment from Apax Partners, Japan’s SBI Group, and, until recently, Tencent.

Tencent’s retreat from Tide is indicative of a broader shift in the company’s investment strategy. The Chinese tech giant had been expanding its global footprint aggressively, especially in fintech, where it took stakes in several UK-based companies. This was part of a global push that also saw Tencent becoming a key player in various tech startups across China and the West. However, in recent years, Tencent has become more cautious, particularly after a domestic crackdown on tech firms in China, prompting a reduction in its global deal-making activities.

According to PitchBook data, the value of Tencent’s completed deals plummeted from $20 billion in 2018 to just $6 billion in 2023. This decline underscores Tencent's strategic shift away from the aggressive investment approach it once championed.

Despite the reduction in international investments, Tencent remains a formidable player in the global tech scene. The company, founded by Pony Ma in 2001 and listed on the Hong Kong stock exchange, continues to report robust financial performance. For the quarter ending in March 2024, Tencent reported a revenue of 159.5 billion yuan (£17.2 billion), marking a 6% increase from the previous year, with net profits soaring by 62% to 41.8 billion yuan.

While Tencent and Tide have not commented on the recent sale, the divestment raises questions about the future trajectory of Tide and other fintech firms that have previously benefited from Tencent’s investment. As Tencent pulls back, the landscape for global fintech investment may undergo further changes, with potential implications for startups seeking international growth and backing.