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NetEase Slides Further Early Friday Without New Game Licenses

The stock of NetEase declined an additional 4 percent intraday Friday after receiving no new game approvals from Beijing.

Anna Vodopyanova
    Jan 11, 2019 1:10 PM  PT
NetEase Slides Further Early Friday Without New Game Licenses

Shares in NetEase Inc. (Nasdaq: NTES) slid an additional 4 percent Friday morning to $244.13 apiece after a tough week for the giant, as news surfaced previously that none of its games was licensed for release by the Chinese government.

China's State Administration of Press, Publication, Radio, Film, and Television gave no green light for games by NetEase among approvals it named between late December and this week. After a freeze on videogames that lasted since March, the state agency began licensing titles last month, which sent the stocks of the Chinese gaming companies higher at the time.

Wednesday evening, however, as various media reported on the lists of licensees, the stock of NetEase dropped, as the expectations were not met.

Also excluded from the approved games was another Chinese giant, Tencent Holdings Ltd. (HKEX: 0700). A conglomerate operating across various industries, the company's shares rose HK$2.20 to $HK331.20 apiece in Hong Kong trading Friday.

China's gaming industry has gone through some tightened regulations in 2018 as Beijing threw its forces into battling the country's worsening rates of myopia, or near-sightedness, among youth. This resulted in a limited number of new games entering the market.

In August, at the height of the crackdown, NetEase's stock tumbled from trading at above $260 per American depositary share to near $200. It has been recovering since, experiencing some volatile trading for the past three months but overall consistently gaining ground, boosted by strong financials for the third quarter.

"While the performances from our flagship titles remain remarkably steady, we are innovators at our core," the chief executive officer, founder, and director of NetEase, William Ding, said in November commenting the earnings. "NetEase is one of the very few companies that has consistently created distinct new game IP for both PC-client and mobile platforms."

This week, NetEase announced that its 11-year collaboration with Blizzard Entertainment Inc. has been extended until January 2023. The two have a publishing agreement on popular games including World of Warcraft, the StarCraft series, the Diablo series, Hearthstone, Heroes of the Storm, and Overwatch.

"We're pleased to continue our successful partnership with Blizzard after more than a decade of close cooperation," Ding said. "The scope of our collaboration is now deeper and broader than ever before. We're confident that together we will continue to bring even more exciting game experiences to players worldwide."