Why Did Tencent Purchase 12 Percent of Snap Inc.?

At a moment when skepticism abounds about Snap Inc.'s future, one of the world's biggest internet companies was revealed to be banking on the company's success.

Tencent, the Chinese company behind the wildly popular social media app WeChat and a global player in mobile gaming, has bought an approximately 12% stake in Snap, the parent company behind the video messaging app Snapchat, financial filings showed Wednesday.

News of the $2-billion investment arrives at a troubling time for Snap. The Venice company released its third-consecutive quarter of lackluster financial results Tuesday and its shares have continued to slide further away from their $17 stock market debut in March.

But Tencent, one of China's three leading internet companies along with search engine Baidu and e-commerce giant Alibaba, sees something in the struggling company that could help reverse Wall Street's souring view.

"Any time a given investor -- whether a company or random billionaire -- makes a big investment it can help to convey that at least someone out there believes in the long-term potential for the company," said Brian Wieser, an analyst for Pivotal Research Group.

Snap shares dove nearly 20% Tuesday in after-hours trading after the company reported lower-than-expected revenue and user growth. They fell $2.21, or 14.6%, to $12.91 on Wednesday in the company's highest-volume day of trading since its initial public offering.

Tencent has been leading a wave of foreign investment by China's tech giants in recent years. The Shenzhen company bought a 5% stake in Tesla Inc. earlier this year and paid $8.6 billion last year to purchase Supercell, the Finnish developer behind the hit mobile game "Clash of Clans."

Alibaba, meanwhile, has already invested $200 million in Snap and poured millions more into ride-hailing app Lyft, virtual reality start-up Magic Leap and app search engine Quixey.

Baidu, which invested in Uber's now shuttered Chinese operations...

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