The Afterpay Ltd (ASX: APT) share price is proving itself to be a Teflon stock. Bad news just doesn’t seem to stick.
The BNPL superstar recovered from an early sell-off to surge 1.7% to $71.91 in late morning trade when the S&P/ASX 200 Index (Index:^AXJO) increased 1%.
The trouble facing Afterpay’s substantial shareholder Tencent Holdings Ltd isn’t worrying shareholders. The sell-down of the stock by another substantial, Lone Pine Capital, is also quickly overlooked by the market.
Tencent tailwind turning into headwind
But it’s Tencent’s US problems that is a little more concerning. The China-based conglomerate’s entry to Afterpay’s register three months ago was touted as a big win as it sent the stock jumping from $29.16 to $47.41 in May, according to the Australian Financial Review.
Tencent owns the popular WeChat app and is regarded as one of the most successful digital platforms businesses in the world.
The investment by Tencent will help the fledging fintech expand more rapidly into the global digital payments space, which includes the lucrative US market.
Chinese tech companies in Trump’s cross-hair
But US President Donald Trump is moving to ban WeChat and stop US companies from doing business with Tencent and ByteDance (TikTok’s owner). Trumps accuses both of spying on users on behalf of the Chinese government.
The ban could conceivably turn Tencent into a liability for Afterpay if the US government expands the restrictions to all of Tencent’s commercial interests.
Should Afterpay shareholders be worried?
The reason why the market isn’t too worried is because the White House said it won’t be going after video game companies, reported PC Gamer.
Tencent owns Riot Games, which makes games like League of Legends and Valorant. It also holds a 40% interest in Fortnite creator Epic Games and 5% of Activision Blizzard, among many others.
If these game developers aren’t impacted, then it’s probable that Afterpay will also escape unscathed.
Also, investors can take comfort in the fact that Tencent doesn’t have majority control of Afterpay and that other US companies have made investments in the ASX stock.
Why investors should remain on alert
But Trump is anything if not unpredictable and the rocketing Afterpay share price leaves little room for bad news.
Afterpay jumped by close to 150% since the start of the 2020 calendar year, making it the best performer among the WAAAX tech darlings.
The Appen Ltd (ASX: APX) share price is the second-best gainer with a 66% increase, followed by the Xero Limited (ASX XRO) share price on 14%.
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