The Tencent-Supercell relationship saw an interesting development at the Chinese gaming and tech consortium where Tencent decided to raise its stakes in Supercell to a valuation of around $11 billion, therefore giving it control of the company. Tencent acquired a majority stake in Supercell in 2016 in hopes of replicating the success of Clash of Clans, released in 2012. A report by Caixing Global states that Tencent used a $40 million Convertible Bond to increase their share in the consortium from 50% to 51.2% to hold a majority stake in Supercell.
This consortium itself controls 81.4% of Supercell’s equity with the sole intent of acquiring the developers behind Clash of Clans. Supercell has been growing rapidly ever since it was founded in 2010, by conquering the niche mobile gaming market with titles like Clash of Clans, Clash Royale, and Brawl Stars. Till early 2016, their revenue continued to grow until they hit the €2 billion milestones.
Tencent raise its stakes in Supercell
Following 2016, Supercell has been facing a continuous decline as their filings to regulators showed that its revenue dropped each year from 2016 to 2020. In 2018, some members of Tencent’s investor alliance were also concerned about these reports and were skeptical of their return on investment gains. Still, in 2019, Tencent decided to increase its stakes in Supercell by buying shares of other members of the investor alliance, which transformed Supercell into its consolidated subsidiary.
After such a large acquisition, Tencent had a shareholding ratio of 70% in Supercell by the end of last year. Recently there has been news that Supercell is recovering and their title Clash Royale, which has been out for five years, caused their revenue to exceed $3 billion last year – according to a report by Sensor Tower, a research company. In addition to that, Supercell is expecting to make a recovery with the new urban construction game Everdale, which was released earlier this year.
Other Tencent Investments
Besides Supercell, Tencent’s other investments in overseas companies have brought huge financial returns to the company. Tencent’s investment in Krafton, a Korean online game developer, led to the development of PUBG Mobile, which has gained a huge player base all around the world. Not only that, but Tencent had also owned a 40% stake in Epic Games, the developers behind Fortnite, valued at $17.3 billion.
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