Shares of Tencent (TCEHY) and NetEase (NTES) are trading in the red as China announced new regulations for the online game industry to limit customer spending and engagement on games.

Lionsgate's (LGF-A) studio business is set to merge with Screaming Eagle Acquisition (SCRM) in a $4.6 billion SPAC deal. The company's Starz platform, however, will continue to be owned by Lionsgate.

Yahoo Finance’s Josh Lipton and Jared Blikre take a look at how the stocks are reacting to the news. For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

JOSH LIPTON: Watching shares of Tencent and NetEase, they take a hit after China announces new regulations targeting spending and engagement on online games. So that was the headline here, Jared.

JARED BLIKRE: Yeah.

JOSH LIPTON: The story is Chinese authorities apparently step in new measures to limit players' spending on video games. Investors did get nervous. You saw some names like Tencent, like NetEase taking it on the chin. The draft rules include things like the elimination of rewards for daily logins, eliminating high-priced transactions of virtual items through auctions.

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Now, some of our viewers who are in, like, let's say Take Two or EA may be wondering, OK, what's my exposure there? Michael Pachter at Wedbush says take a deep breath, relax. This news, he says, should be largely immaterial to the overall performance of Western video game publishers.

JARED BLIKRE: I was following this story this morning and a US ETF called BETZ was in the green. So clearly, this is a regional issue.

JOSH LIPTON: Yup.

JARED BLIKRE: Real quick on the Wi-Fi interactive, there is some spillover from this. You have Tencent, that is this stock here down 9% in the OTC market, still trading a little bit. That might be on delay. But ownership in Tencent is done by a company called Prosus. They have a big material holding and you can see they are down 11% today.

And then here is another one NetEase. That stock is down 16%. And the stock is still up about 20% year to date.

All right, Lionsgate announcing plans to spin off its studio business in a SPAC deal valuing the business at $4.6 billion. The transaction, however, will not include the Starz platform, which will continue to be owned wholly by Lionsgate. And I have an interesting commentary here by Seaport, rates the stock a buy, that would be Lionsgate, saying the valuation in the agreement effectively means that buying Lionsgate shares today gives investors the Starz media networks for free versus estimates of $1.6 to $1.8 billion enterprise value. So there you go. I've been trying to get Starz for free for years, but this account piggybacking thing just, kind of, blew up with the whole Netflix thing.