Chinese Gaming Companies Launch Share Buybacks to Reassure Investors Amid Regulatory Concerns

These mechanisms include rewarding players for daily logins, first-time game spending, and consecutive in-game purchases.

Several smaller Chinese gaming companies have recently revealed plans to initiate share buyback programs.

These moves are widely interpreted as efforts to reassure investors who were shaken by recent regulatory measures aimed at curbing consumer spending on video games.

Last Friday, regulatory authorities in China released draft rules that proposed banning various incentive mechanisms commonly employed in online games.

These mechanisms include rewarding players for daily logins, first-time game spending, and consecutive in-game purchases.

The announcement of these draft rules caused shares in gaming companies to plummet.

By Monday evening, eight gaming companies had announced share buyback plans amounting to a total of 780 million yuan (approximately $110 million).

These companies cited their confidence in China’s gaming industry and the importance of safeguarding investor interests as the reasons behind these buybacks.

These share buyback announcements came in the wake of a seemingly more lenient stance from China’s video game regulator, the National Press and Publication Administration.

The regulator released a statement on Saturday indicating that it would further refine the proposed rules after carefully considering public feedback.

Additionally, on Monday, the regulator approved new licenses for 105 domestic online games for the month of December.

Analysts interpreted this move as a strong indication of continued government support for the development of online games.

Charlie Chai, an analyst at 86Research in Shanghai, noted, “The shift towards a more reconciliatory tone is quite notable.”

He suggested that the regulator might have been surprised by the significant market reaction on Friday, leading to concerns about appearing to backtrack on their commitment to responsible policymaking that fosters investor confidence.

Several companies have been impacted by these developments.

For instance, G-bits Network Technology Xiamen, listed on the Shanghai Stock Exchange, saw its shares rise by 2% on Tuesday but had still suffered an 11% decline since the draft rules were published.

Perfect World Co, listed on the Shenzhen Stock Exchange, dropped 2% and had experienced a 16% decline in share value since the regulatory announcement.

The gaming industry in China had only recently started to rebound in 2021 after an extended period of regulatory restrictions in 2021 and 2022.

It remains to be seen how Tencent Holdings, the world’s largest gaming company, and its closest competitor, NetEase, will fare this week following the perceived shift in regulatory stance.

These two Hong Kong-listed firms collectively lost $80 billion in market value on the day the draft rules were announced.

Hong Kong markets, which had been closed for the Christmas long weekend, were set to reopen on Wednesday, bringing further anticipation and uncertainty to the situation.