Tencent buys 10% stake in Snapchat owner

Tencent Holdings Ltd. has taken a 10 percent stake in social media software maker Snap Inc.

In an SEC filing Wednesday, the Snapchat developer said Tencent bought 145.8 million non-voting shares in the company.

Snap said Tuesday it’s redesigning its mobile application to reach a broader audience and make more money from ads, as third-quarter financials showed sales growth keeps lagging investor expectation. Shares fell as much as 22 percent in extended trading after the announcement, and have dropped about 38 percent since the company’s initial public offering in March.

Snap’s earnings were a dark spot in what’s turned out to be an otherwise upbeat third quarter for tech. Results from companies such as Amazon.com Inc. and Apple Inc. have been met with a warm welcome by Wall Street in recent weeks.

In an advertising market where Facebook Inc. and Alphabet Inc.’s Google grab the majority of new spending, Snap needs to prove it can keep adding users as well as generate more revenue from each. That’s a challenge as Snap’s catchier features, beyond just letting people send photo and video messages that disappear after a short time, keep getting replicated by Facebook.

While the Snapchat app remains the company’s primary business, it has also ventured into hardware by making Spectacles — sunglasses with a built-in camera. Despite the buzz the glasses generated at launch, Snap had to take a $39.9 million writedown because it overestimated the value of its inventory.

Snap had 178 million daily users on average in the third quarter. This includes features such as “Stories”, which lets people share snapshots of their lives that disappear 24 hours after they’re posted. Similar products for Instagram, also called “Stories,” and for WhatsApp, called “Status,” each have more than 300 million daily active users, Facebook, which owns both products, said last week.

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Tencent buys 10% stake in Snapchat owner