Tencent’s Secondary Carve-out:Motivation,Path And Performance Research

The Carve-Out Regulations on Domestic Listing of Subsidiaries of Listed Companies "released on December 13,2019 officially opened the door for domestic Carve-Out.Certain Provisions on Pilot Domestic Listing of Subsidiaries" officially kicked off the domestic Carve-Out listing.Against such a background,Internet groups have also started to seek new opportunities.This paper focuses on the Carve-Out of Internet groups and uses Tencent Holdings’ Carve-Out of Read Write Group for listing in Hong Kong and Tencent Music for listing in the US as case studies to explore the motivation,path and performance of its secondary Carve-Out.First,the motivations for Tencent’s secondary Carve-Out are divided into two categories: one is internal motivation and the other is external motivation.Second,we compare and contrast the similarities and differences of Tencent Holdings’ secondary divestment paths in the study.Finally,market performance and financial performance are analyzed in the analysis of Tencent’s secondary Carve-Out performance,with the event study method used for market performance and the factor analysis method used for financial performance.Based on the above analysis,the following conclusions are drawn: First,the Carve-Out is mainly to meet the financing needs of subsidiaries.Second,Carve-Out are beneficial to the implementation of core-based strategies.Third,Internet groups tend to choose the VIE model for Carve-Out.Fourth,there are differences in the effects of CarveOut of different subsidiaries.Based on the above findings,the following insights can be drawn: First,the Carve-Out should focus on the development strategy of the enterprise and reasonably choose the suitable Carve-Out target.Secondly,enterprises with the intention to Carve-Out should flexibly choose the suitable Carve-Out path to maximize the benefits of Carve-Out.Third,the relevant regulatory authorities should continue to improve the rules of Carve-Out and strengthen the supervision of laws and regulations.Fourth,enterprises with the intention to Carve-Out should pay attention to domestic and international policy trends and analyze the development prospects of the industry.