Source | Benyuan Finance

Author | Li Youshan

Tencent's recent strategic financial maneuvers—divesting Kuaishou shares while investing in Kling—have been aptly termed a 'dual advantage' by market observers. These coordinated portfolio adjustments underscore a sophisticated approach to capital allocation.

On July 6, Tencent executed an off-exchange block trade, selling 273 million Class B shares of Kuaishou, potentially raising up to US$1.6 billion. This move, representing a 40% reduction in its stake, lowered Tencent's ownership from 15.7% to 9%, formally removing it from Kuaishou's list of major shareholders.

Concurrently, Kuaishou's spun-off entity, Kling AI, secured US$3 billion in Pre-IPO funding, achieving a post-money valuation of US$18 billion—a record for video-based large language model companies globally.

While some market voices speculate about 'Tencent's bearish stance on Kuaishou,' we interpret this as a strategic realignment of resources, balancing old and new investment avenues.

The metaphor of the 'fish' encapsulates Kuaishou's entire ecosystem, with 'dual advantage' referring to extracting value from two interconnected segments.

Kuaishou, now valued at over US$20 billion, has seen its core short-video business mature. By divesting, Tencent recovers billions in cash for reinvestment in high-growth sectors like AI infrastructure, while retaining a 9.37% stake to continue sharing in Kuaishou's profits, dividends, and long-term appreciation.

Kling, on the other hand, represents Kuaishou's most dynamic and innovative asset, valued as an AI technology firm. Despite contributing less than 1% to Kuaishou's projected 2025 revenue, Kling commands a valuation equivalent to 70% of the parent platform, with annual recurring revenue (ARR) approaching US$500 million.

The domestic AI video model landscape now features a three-way rivalry among Kuaishou's Kling, ByteDance's Seedance, and Alibaba's HappyHorse. Tencent's investment in Kling secures access to cutting-edge video generation technology, bolsters content production capabilities, counters ByteDance's Seedance lead, and maintains a competitive equilibrium.

Beyond Tencent, Alibaba and Baidu also participated in this funding round.

Investors humorously dub this the 'Anti-ByteDance Alliance,' though, in reality, it reflects strategic positioning to address distinct business needs.

Tencent holds a 1.12% stake through two entities, Alibaba's Hangzhou Aliyun Feitian owns 1.11%, and Baidu's Beijing Baidu Netcom holds 0.28%—collectively just 2.51%, far from constituting strategic control.

As tech giants enter cycles of asset optimization, portfolio swaps have become standard industry practice. This collaboration among BAT (Baidu, Alibaba, Tencent) resembles a pure financial investment.

For Alibaba, Kling fills gaps in consumer-facing content scenarios while securing a long-term supercomputing client for its cloud business. Baidu's motives are straightforward: enhancing multimodal video capabilities to fortify its Wenxin ecosystem.

Significantly, while Kling is valued at US$18 billion, the investment terms include a 2031 exit deadline, requiring repayment of the principal plus 8% annual simple interest.

Kling's path to IPO hinges on its commercialization prowess; Kuaishou, having shed its 'cash-burning' image, still faces scrutiny over the growth ceilings of its main business.

Operations / Yu Shuya Design / Yanweier Data / Tianyancha *All rights reserved. Reproduction prohibited without authorization.

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