Naspers share dive no biggie
The bell tolls at last for Naspers’s listing of Prosus in Amsterdam
Longtime Naspers shareholders who have not been following their investment closely would have been shocked to see the stock trading at about R2,500 this week – a level last seen a year ago.
They would have soon realised that it was the Amsterdam listing of Prosus – and the share split that accompanied it – that wiped more than R1,100 off Naspers’s share price.
And with Prosus making its debut at just over R1,100 per share, it is easy to do the maths.
Nothing lost, really, just a choice to make: more Naspers or more Prosus?
Shareholders had until Friday to decide whether to hold on to the Prosus shares or accept more Naspers stock.
“We expect some ups and down [in the share price] in the next few days,” Naspers CEO Bob van Dijk told Business Times in Amsterdam this week.
But as the choices work their way through the system and European investors become familiar with Prosus, the share prices of both Naspers and Prosus should stabilise.
● Amsterdam boasts the world’s oldest stock exchange. The Dutch claim to have invented shares, brokers, limited liability companies and most of capitalism in an elaborate financing scheme almost five centuries ago to send ships to the East for spices.
All of this happened within hearing distance of the Oude Kerk’s belltower.
Its bell still rings out over the red-light district and these days also scores of kebab stands and souvenir shops selling everything from wheels of cheese to brightly coloured condoms.
That very same bell tolled on Wednesday morning when Naspers listed Prosus on the Euronext — the network of bourses Amsterdam’s stock exchange now belongs to.
Prosus is a portfolio of international internet assets including e-classifieds site OLX, fintech platform PayU and food delivery businesses in Eastern Europe and countries such as India and Brazil. But most important, it also holds Naspers’s 31% stake in Chinese giant Tencent — a $32m bet in the early 2000s that is now worth more than $130bn (R1.9-trillion).
But as the bell tolled, few people were holding their breath.
Naspers’s plan to create Prosus, list it in Europe and unbundle about 25% of it to its own shareholders is long in the making. There was only one gong that mattered and that was the ceremonial one being struck by Naspers CEO Bob van Dijk at 9am sharp.
And so Prosus made its debut on trading screens, about 24% higher than the reference price set only a day earlier.
First flagged early this year and originally planned for July, but postponed due to postage problems, the listing of Prosus had been billed as the largest tech move Europe will see this year.
Van Dijk calls the listing in Amsterdam “the next wave” and says it is with European capital that Naspers and Prosus will achieve the next $100bn in growth.
That is a bold claim.
While the listing instantly makes Prosus the third-largest company on the Euronext, growth among Europe’s largest groups is more of the steady than the stellar sort.
Alphabetically, on the Euronext’s benchmark AEX 25 index, Prosus slots in right between Dutch consumer electronics maker Philips and global human resources group Randstad.
For size, Prosus is beaten only by oil giant Shell and consumer-goods behemoth Unilever. Other companies on the bourse include brewer Heineken, banking group ABN Amro and steelmaker ArcelorMittal. Though all of these names might have big plans for the future — expanding on the back of demand from large developing nations — they do all look like mature businesses. Oil, soap, beer, mortgages and steel hardly sound like products of the fourth industrial revolution. That explains why Euronext CEO Maurice von Tilburg was so visibly happy to welcome Prosus to his bourse amid what he called huge demand from investors.
European funds are starved for tech and starved for growth, remarked one of the other attendees at the listing.
Prosus makes it possible for investors to take a punt on the assets in Naspers’s stable, but without the risks — real or perceived — associated with SA.
The truth is, developing markets and their bourses, such as the JSE, simply do not form part of some international investors’ mandates.
For many years, they have had to pass up Naspers’s stellar growth simply because it was listed in a country teetering on the brink of another credit ratings downgrade to fullblown junk status.
And Naspers’s growth also created serious problems for the JSE itself. The company grew from about 5% of the benchmark Swix index to about 25% in only four years. Which, sadly, for South African institutional investors, meant they were forced to sell Naspers as it grew, because most of them are also locked into mandates that prevent them from being too exposed to a single stock.
With not enough international buyers around, the “forced selling” weighed on Naspers’s share price, according to Van Dijk. This, he says, was partly responsible for the unwieldly “discount” — the difference between Naspers’s own share price and the value of its stake in Tencent. Simply put, it meant that Naspers is undervalued and it is easy to see by how much as Tencent itself is listed in Hong Kong — by just taking the back of a cigarette box and a pencil most investors could see things were not adding up.
And that is why Naspers decided to spin out a quarter of Prosus, while of course retaining control of these valuable assets. Amsterdam also allows the company to keep the same murky control structure that makes Naspers almost immune to hostile takeover bids. The high-voting shares, of which chair Koos Bekker holds a bundle, will still call the shots — for both Naspers and Prosus.
So, it was no surprise to see JSE CEO Nicky Newton-King smiling and posing for pictures with Van Dijk.
When Naspers first announced its plans to list Prosus, she called it a very elegant solution to the company’s “discount problem”. And the JSE is not losing much. Naspers still has its primary listing in Johannesburg and Prosus has a secondary listing on the corner of Gwen Lane and Maude Avenue in Sandton.
But the real question is whether European investors will really pile in. Some might just see Prosus, with its cargo of some lucrative Indian and Chinese consumer-facing internet businesses, as the new ship bringing spices from the East.
Others will know that the reason the spice trade gave some investors such generous returns was because it was a risky business — nearly half the ships on the route never made it back to Amsterdam.