DJ Daniel Sundheim's Fund Bought Up Tencent Music ADRs When They Slid -- Barrons.com
By Ed Lin
They say the song remains the same. Unfortunately, that's also true for Tencent Music Entertainment Group's American depositary receipts, which have gone nowhere so far this year.
Actually, they've gone slightly down. Tencent Music ADRs (ticker: TME) have ticked 4% lower in 2019 through Tuesday's close at $12.70. Meanwhile, the S&P 500--often used as a proxy of the market--has surged 25.3%.
One big Tencent Music shareholder, however, has recently drastically raised its investment in the company, which operates a streaming-music platform in China, Hedge fund D1 Capital Partners bought the equivalent of 4.7 million more Tencent Music ADRs between Sept. 30 and Nov. 22, raising its investment to an equivalent 24.2 million ADRs, a 7.4% stake. Each ADR represents two class A ordinary shares of Tencent Music.
D1 Capital, founded by savvy stockpicker Daniel Sundheim, disclosed the increased investment in a form it filed with the Securities and Exchange Commission. The fund declined to comment on the larger investment.
David Semple, manager of the VanEck Emerging Markets fund (GBFAX), recently told us that he was invested in Tencent Music because of the business model in China. "[T]he power of the music publishers is much less in China, and the power of Tencent is much better," Semple said.
Tencent Music ADRs slid on Tuesday Nov. 12 to close 8.1% lower after the company reported third-quarter earnings. That was also the day that D1 Capital's stake in Tencent Music rose above 5.0%, a threshold that triggers the need for a regulatory filing. Once an investor's stake in a publicly traded entity reaches that point, that investor files a form to show if it will either consider an activist stance, or be passive and not try to meet with management to encourage "exploring strategic alternatives," as it is commonly phrased. D1 Capital filed as a passive investor. By Nov. 22, D1 Capital's Tencent Music investment represented a 7.4% stake.
The fund has been trading in and out of Tencent Music, although the current trend is buying more. Tencent Music ADRs began to trade publicly in December 2018. At the end of 2018, D1 Capital owned the equivalent of 1.7 million Tencent Music ADRs, but sold them all by the end of March, SEC records show. During the third quarter, the fund revisited investing in Tencent Music, and ended September with 19.5 million ADRs.
Inside Scoop is a regular Barron's feature covering stock transactions by corporate executives and board members -- so-called insiders -- as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.
Write to Ed Lin at edward.lin@barrons.com and follow @BarronsEdLin.
(END) Dow Jones Newswires
November 27, 2019 07:29 ET (12:29 GMT)
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