The Chinese tech giants that Beijing is cracking down on are backers of big U.S. IPOs

  • Tencent is by far the dominating corporate shareholder, with significant stakes in half of the 25 largest fundraises by Chinese companies issuing American Depositary Receipts (ADRs) in the U.S. since 2017.
  • That's according to CNBC analysis of publicly available data accessed through Wind Information and S&P Capital IQ.
  • Tencent's holdings in publicly listed companies are so large they rose last year by more than the company made in profit.

BEIJING — As China's anti-monopoly and data security crackdown creeps into restrictions on U.S. IPOs, analysis shows that some of the country's biggest tech companies are deeply invested in those overseas stock offerings.

Gaming and social media giant Tencent is by far the dominating corporate shareholder, with significant stakes in half of the 25 largest fundraises by Chinese companies issuing American Depositary Receipts (ADRs) in the U.S. since 2017. That's according to CNBC analysis of publicly available data accessed through Wind Information and S&P Capital IQ.

Chinese e-commerce giant Alibaba has a few holdings in the list of 25 companies, while other major Chinese tech companies like Xiaomi, Meituan and Baidu each have stakes in one or two of the stocks, the analysis found. Also appearing frequently, typically with smaller stakes, were U.S. asset managers BlackRock and Vanguard.

While Shenzhen-based Tencent is best known for its video games and WeChat messaging app that's ubiquitous in China, the company has also grown into an investing giant.

Tencent's holdings in publicly listed companies last year rose by 785.11 billion yuan ($122.7 billion) — more than the 160 billion yuan ($25 billion) in profit reported for the year, according to the company's annual report. That's not including its subsidiaries.

The company itself is the largest listed in Hong Kong by market valuation.

Tencent said Saturday it was notified by the market regulator of "its decision to halt the merger of Huya and Douyu based on the results of its antitrust review." Both companies are Tencent subsidiaries that listed in the U.S. in the last three years.

However, on Tuesday China's market regulator disclosed it approved Tencent's deal to privatize U.S.-listed search engine and text-input company Sogou.

Regulation intensifies

For many start-ups in China, having a big tech company as a backer has often meant access to vast amounts of data on consumer preferences.

But China's internet industry has also been ruthless. In a 2018 book called "AI Superpowers, China, Silicon Valley and the New World Order," Google's former China head Kai-Fu Lee said the local tech world resembled gladiator fights where nothing was off limits, from copying innovations to launching smear campaigns.

After years of loose regulation, China has intensified its crackdown on massive, homegrown tech giants in the last several months.

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Ride-hailing app Didi — in which Tencent invested — held a massive U.S. IPO on June 30. Within five days, China's cybersecurity regulator, citing national security concerns, launched an investigation into the use of data by Didi and subsidiaries of two Chinese companies that recently listed in the U.S.

The regulator, the Cyberspace Administration of China (CAC), also said new user registrations would be suspended in the interim.

Over the weekend, CAC also announced that companies with data on more than 1 million users would likely need approval before they listed overseas.

The increased scrutiny on data follows regulators' crackdown on tech companies since last fall over monopolistic practices, which led to authorities fining Alibaba $2.8 billion.

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